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THE

STANDARD OF VALUE.

1

STANDARD OF VALUE.

WILLIAM LEIGHTON JORDAN,

F.R.G.S.

THIRD EDITION.

Hon&on:

DAVID BOGUE, 3, ST. MARTIN'S PLACE,

TRAFALGAR SQUARE, W.C.

1883.

london:

printed by william clowes and sons, limited,
stamford street and charing cross.

*i

PREFACE

TO THE THIRD EDITION.

I.

A VERY dangerous argument has been urged against
the views contained in the following pages : not
exactly to the effect that Parliament can do no
wrong — for I do not suppose that any Englishman,
however moderately acquainted with the history of
his country and the characteristics of its constitutional
government, or to whatever political party he may
belong, could desire to have such an interpretation as
that placed upon his arguments — but to the effect
that Parliament can rightfully change the standard
^ of value at its pleasure.

«v Such a doctrine ought to be rejected, not only on

^ the high ground of its impropriety, but also on the

J lower ground of its impolicy and indiscretion.

If honour is to be respected by the governing
powers of the world, it must be maintained that to

vi PREFACE.

borrow money under a given standard of value, and
then to change that standard whilst the debt is cur-
rent, is a breach of faith on the part of the Parliament
or the Government by whom such acts may be
accomplished, whether such change advantage the
national debtor or the national creditor.

Taking a world-wide view of the case : the double
standard of gold and silver was practically the stan-
dard of value throughout the civilised world from
time immemorial to the year 1873. All the enormous
national debts now existing have been borrowed under
that double standard ; and for the Governments of the
world to legislate in such a manner as to establish
a gold standard instead of that double standard
constitutes the most gigantic injustice towards the
labouring classes, who are burdened with those debts,
that has ever been recorded throughout the history
of the world. And, taking a merely English view of
the case : if Parliament, in 18 16, had a right to decree
the legal establishment of the gold standard just after
our immense debt of 850,000,000/. had been borrowed
under the legal establishment of the double standard,
then a future Parliament, returned by the debtors,
who number ten or twenty to one as compared with
the creditors, will have an equal right to decree a legal
establishment of a silver, a copper or a paper stan-

PREFACE. vii

dard ; and thus to make our debt of little value to
the holders. For if Parliament has a right to change
the standard in such a manner as to increase the value
of the debt. 20 per cent then it also has a right to
change the standard in such a manner as to decrease
the value 20 per cent. ; and if 20 per cent, then also
40 per cent, 80 per cent., or totally.

The only honourable excuse for the legislation in-
augurated by England in 18 16, and since followed by
Germany and the United States, is to be found in the
fact that political economists did not understand what
the standard of value really was, as I have pointed out
in the chapter on Lord Liverpool's oversight

A remarkable feature of the case, which is not
generally known, is the fact that, though it is by a
decree of Parliament that the mint is at present re-
stricted to the coinage of gold for unlimited legal
tender, Parliament has not really any constitutional
right to legislate on the subject, for the mint is con-
stitutionally under the control of the Crown. It was
for this, and other reasons mentioned in the following
letter, I desired to dedicate the second edition of this
book to the Heir Apparent to the Crown ; and though
established etiquette prevented the acceptance of that
dedication, I now publish the letter, not only because
it explains the constitutional aspect of the question, but

viii PREFACE.

also because the application for permission to dedicate
has caused an erroneous impression which will, I trust,
be effectively countermined by the 'publication of the
letter itself.

TO

HIS ROYAL HIGHNESS ALBERT EDWARD,

PRINCE OF WALES.

May it please Your Royal Highness—

In the following pages I have pointed out that a letter
addressed to King George III. by the first Earl of
Liverpool was the prevailing influence which induced
Parliament to abolish the Silver Standard, and to
make the gold sovereign the sole representative of the
Pound Sterling.

The Noble Earl, in the preamble of his letter, ad-
dresses the following words to His Gracious Majesty :

" // is apart of Your Royal Functions to attend to
" the state of the Coins of Your Realm, and to cause
" every defect to be removed, which mistaken policy has
" introduced, or the waste of time may have wrought in
" them. It is also, I well know, Your Majesty's earnest
" wish and inclination, on this and on every other
" occasion, to consult the convenience, and provide for
" the interests of Your People. For these reasons I have
l< thought it my duty to address to Your Majesty a
" treatise, which has for its object to explain and eluci-

PREFACE. ix

" date the true principles of Coinage ; to point out the
" errors committed in this respect under the authority
" of Your Royal Predecessors, and to suggest the best
" methods of preventing such evils for the future?

As what I will rather call an oversight than a
mistake, made by the Earl of Liverpool in the reasons
given for recommending the abolition of the Silver
Standard, has not only begun to produce very pernicious
effects throughout Her Majesty s Empire, and, to a
lesser extent, throughout the civilised world, but has
also become a source of injustice towards the great
majority of Her Majesty's subjects, to the benefit of a
few wealthy families ; and as I am sure that Your
Royal Highness is no less interested than was His
late Majesty King George III., in all that affects the
welfare of the Empire and of mankind, I respectfully
dedicate these pages to Your Royal Highness, in the hope
of calling your attention to the oversight to which I
have alluded, in the firm conviction that your perception
of it will lead to the adoption of such measures as will
effectually counteract its present evil effects and its
prospective dangers. The nature of the subject will, I
trust, sufficiently explain my preferring to address Your
Royal Highness regarding it rather than Her Gracious
Majesty, to whom it would otherwise befitting that a
reply to a letter addressed to one of Her Royal Pre-
decessors should be dedicated. Notwithstanding Her
well-known wish and inclination to consult the con-
venience and provide for the interests of Her People,

x PREFACE.

Her Majesty could not be expected to give the question
that personal attention which I make bold to request
from Your Royal Highness,

It is not merely because Parliament seems to have
been led astray by Lord Liverpool on this question that
I have made bold to dedicate to Your Royal Highness
the following arguments ', nor do I now address them to
Your Royal Highness with a view of inducing Her
Majesty ', by the mere exercise of Her Royal Prerogative,
to reopen the Mint for the unlimited coinage of silver
without the previous consent of Parliament ; but, as the
Constitution confers this power on the reigning Sove-
reign, who can constitutionally control the question
without the intervention of Parliament, and has thus a
special interest and responsibility in the due administra-
tion of justice as various interests of Her Majesty *s
subjects are affected by the character of the coins issued
by the Mint, it appears the most natural and reasonable
course of procedure to address Your Royal Highness, in
the hope that your appreciation of the question may lead
to such an exercise of your own constitutional influence,
as may hasten the Parliamentary legislation which the
situation requires, without attempting to induce Her
Majesty to have recourse to the exercise of Her Royal
Prerogative; for I cannot doubt that Your Royal High-
ness would be among the last to advise Her Majesty
to disregard the advice addressed by the Earl of
Liverpool to King George III., to the effect that, though
this great prerogative is unquestionable, it is certainly

PREFACE. xi

advisable that in the exercise of it the King should
avail himself of the wisdom and support of His Parlia-
ment^ when, as at present, it must be assumed that a
full discussion of the question must lead Parliament to
acknowledge and to recommend a remedy for the
injustice which has unwittingly been inflicted by a
preceding Parliament

I am convinced that the influence of the enhancement
of the standard of value, in contributing to the fall of
the Roman Empire, by making the rich more rich and
the poor more poor, thus leading to reckless extravagance
on the one hand and to the recklessness of despair on
the other, has never hitherto been fully appreciated ; and
that the evil effects of the recent enhancement of the
standard, together with the greater evils that may yet
arise from it, have not been over-estimated by Ernest
Seyd, Cernuschi, Wolowski, or Laveleye.

That Her Majesty's councils may in this, as in all
matters, be guided with such sound wisdom and dis-
cretion as may lead to a long continuance of the Form
of Government under which it is the privilege of Her
Majesty's Subjects to live, is the earnest desire of Your
Royal Highnesses

Obedient Servant,

THE A UTHOR.

Buenos Ayres,
\%th July, 1882.

xii PREFACE.

II.

Together with Lord Sherbrooke, Mr. Arthur Crump
is among the most determined opponents of the double
standard. And, like Lord Sherbrooke, whose mis-
understanding of the question I have pointed out as
being similar to Lord Liverpool's, Mr. Crump expends
a considerable amount of uncomplimentary denuncia-
tion on ideas which he imagines to be entertained by
bimetallists, but which are really creations of his own,
or of Lord Sherbrooke's fancy. It is on this account
that Mr. Crump is able conscientiously to attempt to
taunt bimetallists by asking, " How it is that the bi-
metallic system has not enabled the bimetallic countries
to absorb the silver that is now in superfluous
supply ? "*

Mr. Crump's misconception of the subject makes
him blind to the fact that, in consequence of the
example set by England in 1816, the bimetallic system
ceased to exist in 1873 ; and that bimetallists are
advocating a restoration of that system merely because
if restored it would cause the existing supplies of silver
to be beneficially absorbed at their former value.

Suppose a law were passed compelling the factories
to limit themselves to the manufacture of woollen and
linen articles, to the exclusion of cotton. The Liver-
pool merchants would find their market glutted with a

* ' A Review of the Position and Prophecies of the Bimetallists/ By
Arthur Crump. Effingham Wilson, London, 1882, p. 55.

PREFACE. xiii

" superfluous supply " of cotton, and if they were then
to inaugurate agitation for the purpose -of inducing
the Government to rescind the obnoxious law, on the
plea that if the factories were again allowed to manu-
facture cotton articles, the otherwise superfluous
supply would quickly and usefully be absorbed in a
manner beneficial to the community in general, though
to a certain extent disastrous to the holders of wool
and linen who had been unfairly advantaged by
the enactment of the law, then those advocates
of the right to manufacture cotton would hold the
same position in the market for articles of clothing
as that which is now held by bimetallists in the
money market ; and if an Anti-Cotton Crump were
to taunt those advocates of fair play for cotton by
arguing that the low price of the article showed that
nobody wanted their " superfluous supply," I should
say that he had either rashly rushed into the dis-
cussion of the question without having acquainted
himself with the antecedents which had given it a
raison <Titre, or else that he was a partisan of the
holders of wool or linen, endeavouring to throw dust
into the eyes of the public for the purpose of prevent-
ing them from perceiving that the closing of the
factories against cotton enhanced the cost of all
articles of clothing and made even woollen blankets
more scarce and dear than they would otherwise be ;
because the demand for wool to make articles which
would otherwise be made of cotton would give wool a

xiv PREFACE,

higher value than it would otherwise have. The
restriction on the supply of raw material for the
manufacture of articles of clothing would be practically
felt in every cottage, reducing the comforts of their
homes and their personal clothing, even though they
might be left in ignorance of the fact that an arbitrary
law was alone depriving them of the greater amount
of comfort which they might otherwise possess. In
precisely the same manner the closing of the mints
against silver restricts the supply of metal available
for the payment of the interest on the National Debt,
and leaves less value in the hands of each labouring
man than he would retain if the coin in which the law
arbitrarily enforces payment of the interest on the
debt had not been enhanced in value by the restriction
of the coinage, caused by the law which has arbitrarily
deprived all debtors of the right they held, under the
original terms of the National Debt, to have both
silver and gold,, at their pleasure, manufactured into
coin with which to pay the interest on the debt.
Lord Sherbrooke and Mr* Crump ignore all this, and
instead of fairly facing the question, direct their efforts
towards the disparagement of the intelligence of bi-
metallists in a manner which might be allowable on
the part of openly avowed special- pleaders for the
enhancement of the value of the property of the
bondholders, bent on enabling the latter to extort
as large a revenue as possible by all possible means
from the wealth-producing labour of the country ; but,

PREFACE. xv

though that mode of dealing with the question might
be allowable for avowed special pleaders, it is
unworthy of those who pretend to speak as Statesmen
or Political Economists.

Just exactly as the reopening of the factories for
cotton, under the circumstances above suggested,
would at once restore the market value of that article,
and at the same time bring down the price artificially
given to wool and linen by the previous closing of the
cotton factories ; so also the reopening of the mints
for the coinage of silver would restore the market
value of that metal and at the same time bring down
the enhanced value which has been arbitrarily given
to gold by the closing of the mints against the coinage
of silver.

Mr. Crump tells us that : " The best thing to do is
for those who find it their interest to adopt bi-
metallism to get as many as they can to join them,
and try what will be the result of opening their mints,
first of all, to a limited coinage of silver. If the
market price of the metal keeps up or improves, they
can increase the amount." *

Bimetallists will, however, I hope, have nothing
more to do with any such palliatives ; for as a matter
of principle, limitations of coinage have a tendency to
defeat their own object, by causing the coinage of the
maximum allowed by law, even though that might

* ' A Review of the Position and Prophecies of the Bimetallists.' By
Arthur Crump. Effingham Wilson, London, 1882, p. 52.

xvi PREFACE.

greatly exceed what would be offered for coinage in
the absence of any arbitrary limit Suppose, for
instance, the mints to be open as formerly for the
unlimited coinage of both silver and gold, and laws
then to be passed restricting them from adding more
than 10 per cent, to the existing amount of silver coin.
The first effect of this would be that many who might
otherwise have employed silver for other purposes
would determine to get it coined whilst possible ; and
the nearer the approach to the limitation, the greater
would be the desire to have silver turned into coin.
Thus the first effect of the artificial limitation would
be to increase the amount of silver coin ; and then, as
soon as the limit was reached, the value of silver in
relation to gold would of necessity fall ; for as gold
alone would then command the right of coinage, it
would command a premium on the ratio which existed
when silver also commanded that right

For these reasons, Mr. Crump's idea of the coinage
of limited amounts of silver might cause ten times as
much of his " superfluous supply " to flow to the mint
as would be taken there under an established system
of unlimited coinage ; and notwithstanding all that
excessive coinage of silver, the right of coinage com-
manded by gold would give the latter a premium on
whatever might be the established ratio for gold and
silver at the mint.

Mr. Crump says : " Unlike the large addition made
to the gold in the world from 1848 onwards, the silver

PREFACE. xvii

that now troubles us is an unprofitable superfluity.
Nobody wants it. The gold was in demand, and was
rapidly absorbed without any thought of such arti-
ficial aid as is proposed by which to get rid of the
superfluous silver."* This contains a serious mis-
statement as regards facts. The gold alluded to was
not absorbed without such aid as is proposed now for
the absorption of silver. All that is proposed is that
the mints should be open for the absorption of the
present supplies of silver, exactly in the same manner
as they were kept open for the absorption of the large
supplies of gold. It is the arbitrary closing of the
mints against silver that has made it " an unprofitable
superfluity," just in the same manner as the closing
of the factories against cotton would make existing
stocks of that article " an unprofitable superfluity," or
just as a closing of the mints against gold in 1848
would have made the supply of that metal " an
unprofitable superfluity."

The remarkable character of Mr. Crump's arguments
may be illustrated by the following paragraph : —

"Bimetallism on that basis, viz. the gold standard
with silver circulating below its market value, is really
all that is wanted for countries which can afford to
maintain a gold reserve against the issue of notes.
Countries having a silver standard can likewise cir-
culate silver coins below their market value for

* ' A Review of the Position and Prophecies of the Bimetallism.' By
Arthur Cramp. Effingham Wilson, London, 1882, p. 55.

b

xviii PREFACE.

domestic use, and keep either a silver reserve or a
mixed gold and silver reserve against their note issues
— with only free mintage for gold." *

Even supposing it were possible for Mr. Crump to
explain how silver coins could be made to circulate
" below their market value," or how a country could
have a silver standard "with only free mintage for
gold " : even so, the fact would remain that the " bi-
metallism" proposed by him would not be bimetal-
lism at all ; for it would not constitute a re-establish-
ment of the double standard, which cannot exist
without the mints being open for the unlimited coin-
age of both silver and gold : thus leaving it to the
public (as was the case before 1873), and not to the
capricious action of arbitrary laws (as has since been
the case), to decide what amount of either metal to
have coined, at a fixed ratio, and what to use for
other purposes.

I cannot take leave of Mr. Crump's book without
endorsing the following sentence : — " Whether we are
right or wrong in our views, we claim for ourselves
that with which we find no fault in others, viz. the
right to speak out what we think." And I hope that
I have exercised that right with at least as much
courtesy and moderation as Mr. Crump.

* • A Review of the Position and Prophecies of the BimetaUists.' By
Arthur Crump. Effingham Wilson, London, 1882, p. 52.

P<i< "^" Si "' «» '^ -3«»— ' 1»m

PREFACE. xix

III.

I have carefully, and I might indeed say elabo-
rately, pointed out that Lord Liverpool mistook alter-
nations of gold and silver circulation for alternations of
the standard of value : and that, notwithstanding those
alternations of currency, gold and silver jointly formed
the standard of value from time immemorial up to the
year 1873. A leading journal, however, accuses me
of not having "been able to perceive that there never
has been, and never in the nature of things can be, a
permanent double standard, though there may be and
have been alternative standards." * Not only is it
unfair to offer this as a reply to my arguments, inas-
much as it conveys the erroneous impression of my
having written in ignorance of the controversy on the
subject, but it also misrepresents the main point at
issue; for I merely contend that the English mint
ought to be open for the coinage of silver as well as
for the coinage of gold as formerly ; and the question
as to whether the resulting standard of value would
be such as should be termed an alternative standard
or a double standard is quite a minor question. Be-
sides this, I have, as a question of theory, admitted
that a legal restoration of the double standard might
bring about a practical alternation from our present
gold standard to a silver standard,! though it is a
mere matter of fact that all the alternations of gold

* The Daily News t December 27, 1882. f See pages 72 and 76.

b 2

xx PREFACE.

and silver currency in England before 1816 took place
under a practical as well as a legal continuance of the
double standard. And I have argued that even if it
were certain that the legal restoration of the double
standard would result in a practical alternation from
a gold to a silver standard, the legal restoration
ought nevertheless to be effected, simply because the
national debtor has a right to it Such a prospect,
which I have shown to have little possibility of prac-
tical realization, would indeed make it all the more
incumbent on the national debtor to assert his right
to the legal restoration.

I contend that as the National Debt was borrowed
under a certain standard of value established by law
(which standard I call a double standard, though the
Daily News and Lord Sherbrooke call it an alternative
standard), that law ought not to have been tampered
with in such a manner as to change the standard of
value whilst the debt is current. Up to the year
1873 silver commanded the same right of coinage as
gold ; and the two metals jointly formed the standard
of value ; but now the National Debt is measured by
the gold standard, and is thus made 20 per cent,
heavier than it would be if measured by the standard
under which the money was borrowed. I therefore
contend that the English mint ought to be open for
the coinage of silver on the same terms as for the
coinage of gold as long as the National Debt remains
unpaid. And I have endeavoured to show that Lord

PREFACE. xxi

Liverpool was mistaken in supposing that the alterna-
tions of gold and silver currency in England consti-
tuted alternations of the standard of value whilst the
English mint accepted whichever metal was offered
for coinage ; but this latter is a question which does
not affect the main point at issue, though his mistake
on that question seems to have prevented him from
perceiving the injustice which is done to those who
have to bear the burden of the National Debt, by
depriving the holders of silver of the right to have it
made into coin at the English mint for unlimited legal
tender.

IV.

To be quite clear as to what would constitute a
practical alternation from a gold to a silver standard,
or vice versa, it may be observed that if before the
recent closing of the mint in France against silver
there had at one time been an established premium on
gold, and at another time on silver in France, then
there would in France have been a practical alternation
of standard under the legal establishment of the
double standard. I have, however, seen no record of
any such alternate premiums. Such premiums, if they
existed, must have been trivial, for the price of silver
in London for more than 40 years before 1873 did not
vary more than the price of sterling gold bills of
exchange on London in foreign markets, payable in
gold in those markets. And if such premiums did not

xxii PREFACE.

exist, then the double standard prevailed practically as
well as legally, notwithstanding the^almost complete al-
ternations of gold and silver circulation which occurred.

Though gold was once nominally at a high premium
for a long time in England under the legal establish-
ment of the double standard, that was a natural con-
sequence of the abraded condition of the silver coins ;
and it was not, strictly speaking, a premium on gold,
but rather a premium on coins of full weight as com-
pared with those of light weight, or, more strictly, a
discount on light coins. The double standard valua-
tion then prevailed in England both by law and
practically.

It seems indisputable that before 1848 France was
on the verge of a practical alternation to a silver stan-
dard under the double standard law; and that if,
instead of the great discoveries of gold soon afterwards
made, there had been similar discoveries of silver, then
the practical separation of the gold and silver standards
of value, which actually occurred in 1873, would have
occurred soon after 1848 ; and the question of the
standard of value would then immediately have become
a practical one in England, instead of being postponed
until after 1874; for the national debtor would then
have had the same practical inducement as at present
to assert his right to pay in silver; whereas it is a
mere matter of fact that the injustice he suffered in
theory did not become of much practical importance
until after 1873/

PREFACE. xxiii

V.

Mr. Reid * who fully appreciates the rising value of
gold and the evils resulting from it, proposes, as a
remedy, the issue of i/. notes and lay. notes by the
Bank of England. Whatever the intrinsic merit of
such a course might be, it must be borne in mind that
what the national debtor has a right to demand is the
coinage of silver at the mint, and not an issue of paper
money. And besides this, such notes, unless issued to
such an extent, unsecured by coin or bullion, as to en-
danger their convertibility, would form a very trivial
palliation for the enhancing value of gold and would
not check its rise in relation to silver.

VI.

Mr. Pilling,f who informs me that he has written his
pamphlet in consequence of having read my paper on
"Lord Liverpool's Oversight," very fully appreciates the
evil that is wrought by the tendency of any enhance-
ment of the standard of value to bring about com-
mercial and political difficulties. But instead of
advocating the reopening of the mint for the coinage
of silver on the same conditions as gold, Mr. Pilling
proposes to leave the amount of gold coinage to be
determined by the public as at present, and to leave it

* 4 The Enhancing Value of Gold and the Industrial Crisis.' By W. S.
Reid, General Manager of the Capital and Counties Bank, Limited.
Effingham Wilson, London, 1883.

f ' Money.' By William Pilling, Buenos Ayres.

xxiv PREFACE.

in the hands of Government to issue silver for un-
limited legal tender at their discretion, at a fixed ratio
in relation to gold. In this manner Mr. Pilling thinks
to obtain a more steady standard of value than under
a purely gold standard, or under the formerly existing
double standard. But even, supposing it to be pos-
sible in practice to carry out the principle theoreti-
cally enunciated by Mr. Pilling, the establishment of
such a standard would be a breach of contract as
regards the National Debt. Be the merits *or the
demerits of the standard under which the debt was
contracted what they may, that is the standard which
should be sustained as long as the debt remains
unpaid. If it is desirable for a new and better
standard of value to be introduced, then let the debt
first be paid in full. But, in" point of fact, I do
not think that any one can study the history of our
pound sterling without perceiving that it is merely the
existence of the National Debt itself which has led to
the legislation which has caused the recent enhance-
ment of the standard of value.

VII.

Extract from Letters to Mr. Grenfell> dated \gth and
2 1 st January y 1883.

London, 19/A January^ 1883.

Lord Liverpool's reasons for free coinage are to the
effect that if any charge were made for coining, the
measure of property would not in such case be perfect,

PREFACE. xxv

and that the weight of the coins would have to be
diminished to pay for the coining.

The fact is, however, that the standard of value is
not affected by the question as to who is to pay
the cost of coinage. Nor is there the slightest neces-
sity for the mint to change* the weight of the coin
because the cost of making it is to be paid by
importers instead of by Government

If the English mint were now reopened, without
international treaty, for the coinage of silver at the ratio
of 1 5£, it would of course get what profit it could on the
present market value, which would soon cease to show
the existing margin for profit, or else yield the
Government a large and continuous income. And
even if, instead of being so reopened, untrammelled
by international treaties fixing its course of action,
it were reopened to silver under an international
treaty binding it, together with the other mints under
the international bond, to a joint course of action,
even so, a fixed charge established by treaty to cover
the cost of coining would not only be an effectual
check on extravagant coinage, but would also place a
special check on any redundancy of silver currency ;
and cause silver bullion specially to perform the
functions of international money. For, as the cost of
coining the silver crowns or dollars to represent a
pound sterling would be four or five times greater
than that of coining the gold sovereign,* holders of

* The extra cost is over-estimated above, but that does not affect
the argument.

xxvi PREFACE.

gold would therefore be more ready to have it coined
to serve as internal currency than holders of silver,
and there would therefore be a tendency to hold silver
in the form of bullion rather than as legal tender coin.

A charge for coinage, even if only sufficient to cover
the actual cost without leaving any profit to the
Government, would thus form a natural check on any
superfluity of silver coinage beyond the wants of
commerce. By an international agreement to the
above effect, the double standard would be just as
effectively established as by an agreement binding
all the mints to "free coinage ;" and under it
gold would naturally be preferentially taken to
the mint in consequence of its coinage costing less
than that of silver : whereas, under the system of
"free coinage/' Government would really pay a
premium for the presentation of silver rather than gold
for coinage, for they would pay four or five times as
much for coining a pound sterling in silver as for
coining it in gold And silver 'coin thus artificially
forced into the market would have to be used, whilst
gold might be held as bullion ; though but for the
extra price paid by the Government for coining silver,
the gold would naturally be coined and the silver
be retained in the form of bullion.

Thus the system of " free coinage," which, under a
single standard, has simply the demerit of its extrava-
gance, becomes under a double standard not only still
more extravagant, but also absolutely pernicious, for
it deranges the course of natural selection on the part

PREFACE. xxvii

of the public as regards the bullion they take to
the mint for coinage.

London, zut January, 1885.

Lord Liverpool's misunderstanding as regards the
standard of value led him to suppose that any charge
made by the mint for coining gold as unlimited legal
tender would make the " measure of property imper-
fect ; " and it is in consequence of statesmen having
been imbued with that mistake that the mint has been
bound not only to unlimited coinage of all gold
presented to it for the purpose, but also to its free
coinage — that is to say, for every 40 lbs. weight of
standard gold presented for coinage, the mint is
bound on principle to give 1869 gold sovereigns
weighing 40 lbs. ; thus returning in coin the same
quantity of pure gold as received in bullion, and
making no charge for the cost of coining it

I have constantly expressed my conviction to the
effect that as soon as the double standard becomes a
subject of practical discussion in Parliament, it will be
found requisite to abandon the present system of free
coinage (that is to say, coinage free of charge) for the
purpose of re-establishing the double standard by
opening the mint for the unlimited coinage of silver
as well as of gold. No one in so influential a position
as that which you hold has hitherto expressed an
opinion at variance with that of Lord Liverpool on
this point For the Governor of the Bank of England
openly to oppose Lord Liverpool on the question of
the gold standard, constituted an important event in

xxviii PREFACE.

our financial history ; and it would be a scarcely less
important event for the Governor of the Bank to oppose
Lord Liverpool on the question of free coinage — that
is to say, as regards making a charge for coining, or
coining free of charge.

To prevent the risk of misunderstanding, allow me
to re-state that my main contention is to the effect that
justice to the labourer demands that the mint should
be open for the coinage of both silver and gold for
unlimited legal tender : technically at the ratio of I5£ *
to i, though equity would be satisfied by the more
convenient ratio of 15J to 1. And I contend that
Parliament ought not to hesitate for the purpose of
considering whether the course of justice would, or
would not give us a silver instead of our gold circula-
tion, nor as to whether a silver would, or would not be
more advantageous to the commercial community than
a gold circulation. These, together with the question
as to who is to pay the cost of coinage, are matters of
minor importance from the above point of view. But,
when considered as a question of commercial conveni-
ence, into the discussion of which I have been drawn
by your criticism, then the question of free coinage (as
distinct from unlimited coinage) becomes of para-
mount importance. The whole question as to whether
the double standard is or is not superior to the gold
standard from a merely commercial point of view,
seems to me to depend upon it, for I cannot consider
the superior steadiness of the double standard alone

* More exactly 15*209 to 1.

PRE FA CE. xxix

sufficient to compensate for the extravagance and in-
convenience of throwing the mint open to the unlimited
coinage of silver free of charge.*

VIII.

The Issue Department of the Bank of England has
really formed the sheet-anchor of our financial system,
and I suggest that the mint ought to be under its
control ; or that, at any rate, the Issue Department of
the Bank should in all respects act as agent between
the mint and the public ; and that the existing arrange-
ment between the Government and the Bank should
be so modified as to allow the profit on the issue of
notes to supply an income to cover the loss incurred by
abrasion of the coinage.

In this manner the currency would be completely

self-supporting, or might easily yield a considerable

income to recompense the Banking Department of the

Bank of England for the transaction of Government

business. .

London,

itth April, 1883.

* Lord Liverpool states that what he means by the mint being
" free " is " where every one has a right to bring gold or silver to the
mint to be converted into coin ; not at the charge of the person who
so brings it, but of the public."

The term must not, however, now be understood to mean more than
merely unlimited coinage, unless otherwise expressed ; and not neces-
sarily free coinage in the sense defined by Lord Liverpool. It is now
used by Mr. Gibbs and Mr. Grenfell in this restricted sense.

As mentioned in the footnote on page 31, the Quarterly Review for
April has declared against Lord Liverpool as regards coinage free of
charge.

PREFACE

TO THE SECOND EDITION.

-»o«-

In commenting on the First Edition of the following
Paper on " Lord Liverpool's Oversight " a few days
ago, a London reviewer alludes to it as a "defunct
controversy." If, however, the reviewer will look a
little more closely at the book, he will find that it not
only is not the defunct controversy he supposes, but
that it is the discussion of a question which was never
dreamt of in the philosophy of William Cobbett, Sir
Robert Peel, or John Stuart Mill ; and that it is not
only a " living question," but what the Lord Mayor of
London has recently, at a public meeting at the
Mansion House, declared to be " a question which he
thought there could be no denying was the most
important of the present age."*

London,

September 1882.

* The Times, nth March, 1882. See footnote on page 82.

CONTENTS.

■o«

PART I.

PAGB

Lord Liverpool's Oversight and its Con-
sequences .. .. .. .. .. .. i

PART II.
The Double Standard and the National

u Bib l •• •• •• •• •• ,» •• 35

PART III/

The Pound Sterling : its History and

Character .. .. .. .. .. .. 79

APPENDIX.

Replies in Discussion and other Articles .. 101

LORD LIVERPOOL'S OVERSIGHT

AND

ITS CONSEQUENCES.

A Paper read before the English Literary Society of Buenos
Ayres on the 14th of June, 1882, in support of the following
resolution : —

" The restoration of the Double Standard of Value which was

discarded in 1873, is desirable?

B

g^a^' » » tv^ , ii i. !■■ m j i iM *~^^w*n^~~^mr i i t i i !■■>» > #' <

LORD LIVERPOOL'S OVERSIGHT

AND

ITS CONSEQUENCES.

I.

A LETTER addressed to King George III. by the first
Earl of Liverpool was the prevailing influence which
induced Parliament to abolish the silver standard and
to make the gold sovereign the sole representative of
the Pound Sterling ; and the present mint regulations,
which were established by Sir Robert Peel's Act in
1816, are in exact conformity with the principles
advocated by Lord Liverpool in that letter.

My present object is to point out what I will rather
call an oversight than a mistake made by the Earl of
Liverpool ; and also the very pernicious effects which
it has recently begun to produce throughout the
British Empire, and to a lesser extent throughout
the civilised world.

To illustrate the oversight in question I will quote
from Lord Liverpool's letter an extract in which his
principal argument is clearly stated.

B 2

4 THE STANDARD OF VALUE.

Lord Liverpool says : —

" Coins must bear a due proportion to the wealth
and commerce of every country in which they are
current In former times it was found necessary
gradually to introduce into the currency of this
kingdom, silver coins of a greater weight and value,
in proportion as the wealth and commerce of it
advanced. Thus pennies, half-pennies, or mailles,
and farthings, were at first the only silver coins in
currency. Groats and half-groats were afterwards
introduced, and in subsequent periods, first shillings
or testoons, and afterwards crowns and half-crowns
were coined, and for the same reason brought into
currency. In like manner, when the commerce of the
kingdom had increased to a certain extent, coins
made of gold were first struck at the English mint,
and introduced into circulation. It was natural, that
gold coins, as of less bulk, and of greater value, should
be so introduced, and should become legal tender,
equally with our silver coins ; and, in proportion as
our commerce continued to augment, that they should
gradually take the place of the silver coins ; and at
length, when our trade had attained the very great
degree of extent and splendour at which it has arrived
in the course of the last fifty years, that they should
become the principal measure of property and instru-
ment of commerce, and leave to the silver coins the
function of being employed only in the smaller and
inferior branches of it."

LORD LIVERPOOL 9 S OVERSIGHT. * 5

The oversight which Lord Liverpool seems to have
made is that he does not appear to have perceived
the intrinsic and very important difference between
the character of a change by which silver shillings are
coined to displace silver pennies, or silver crowns to
displace silver shillings, and that by which gold
sovereigns are coined to displace silver shillings or
crowns.

By the changes from silver pennies to silver crowns
the value of the silver of which the coins are made is
not affected, and therefore the value of the standard
unit remains unaltered.

But though the abolition of silver pennies and their
substitution by larger silver coins does not affect the
value of the standard unit, the effect of a change in
the coinage is very different when it is decreed that
the silver coins (except a small amount issued at a
fancy valuation) are to be abolished and substituted
by gold coins.

In the latter case the demand thus created for gold,
to supply the circulation which would otherwise be
supplied by silver, gives gold a higher value than it
would otherwise have; and, therefore, the 'decree
which substitutes gold coins for silver coins raises the
value of the standard unit.

This principle, apparently overlooked by Lord
Liverpool, I do not suppose anybody, whose attention
has once been directed to it, can fail to perceive to be
true in theory, however slight its practical effects

6 • THE STANDARD OF VALVE.

might be. And before endeavouring to show to
what extent it may reasonably be estimated that the
value of the standard unit has practically been raised
by the abolition of the silver standard, I beg to draw
your attention to a special reason why any change in
the standard of value ought at that time to have been
strictly avoided.

II.

For the above purpose I cannot do better than
refer to the conversation which took place between
the representatives of the International Congress for
the simplification of coinage which met in Paris in
1867, and Mr. Goschen, then Chancellor of Her
Majesty's Exchequer.

It was suggested by the above-mentioned Congress
that the weight of the English sovereign should be
reduced sufficiently to make twenty shillings exactly
equal to twenty-five francs. This would be so slight
a reduction that the suggested new sovereign would
still be heavier than many of the sovereigns which,
though worn by ten or twelve years of use, are never-
theless not so much worn as to cease to be of full
legal tender weight.

Notwithstanding the very slight amount of the
suggested change, Mr. Goschen, representing Her
Majesty's Government, replied that the reduction in
the weight of the sovereign would constitute a breach

THE RIGHT HON. G. J. GOSCHEN. 7

of faith with the national creditor, or holders of the
National Debt, and that, therefore, it could not be for
a moment entertained.

I take the liberty of expressing my perfect sym-
pathy with Mr. Goschen in his zeal for maintaining
strict faith with the national creditor, and paying to
him every farthing to which he is equitably entitled
by the terms of the national loan.

But the same National Debt which caused Mr.
Goschen so zealously to refuse to allow of the slightest
change in the standard of value, existed when the law
was enacted which substituted gold for silver coins
and thus changed the standard of value.

The simplest dictates of common sense tell us that
if the slightest reduction of the standard of value con-
stitutes a breach of faith with the national creditor
which ought to be strictly avoided ; then it ought,
with the same zeal, to be maintained that the slightest
enhancement of the standard of value constitutes a
breach of faith with the national debtor which should
have been just as strictly avoided.

I now beg your attention whilst I endeavour to
estimate how much the abolition of the silver standard
has raised the value of the standard unit, thus increas-
ing the value and the burden of the National Debt
whilst leaving its nominal amount unaltered.

8 THE STANDARD OF VALUE.

III.

The gold sovereign is at present worth about 15
per cent, more than the market value of the silver
pound in which the debt could be discharged but
for the adoption of Lord Liverpool's system. Thus
the National Debt of 750,000,000/. is equivalent to
what would be the value of a debt of 862,500,000/.
if the interest or capital could be discharged in
silver of the relative value which actually rules in the
market.

It must not however be immediately inferred from
these facts that Lord Liverpool's system has made so
great a real increase in the burden of the debt as
112,500,000/ ; thus giving so large a bonus as that to
the bondholders ; for a part of the present difference
between the value of the gold, and that of the silver
pound might be due to a fall in the value of the silver
pound also caused by that system.

To arrive at a just estimate of the extent to which
the value of our standard unit, and consequently the
value of the National Debt, has been increased by the
adoption of Lord Liverpool's views, it is obviously
useless to enter on the vexed question as to how
much of the relative difference of 15 per cent, between
the silver and the gold pound sterling would imme-
diately disappear if Lord Liverpool's system were
abrogated. All that is requisite is merely to estimate

T»^PW^^^W»

THE EDINB URGH RE VIE W. 9

how much the absolute value of gold has been en-
hanced by that system.

For this purpose I now ask your careful attention
in the first place to the following extract from the
Edinburgh Review for April 1879. The reviewer
says : —

" In this country, and generally, it has been taken
for granted that there has been of late years an
absolute depreciation of silver, and that gold is simply
maintaining its old value. * . . A very different con-
clusion, however, was arrived at by the commission
appointed in 1876 by the Congress, of the United
States. They maintained that there had been no
depreciation of silver, and that the difference between
the values of the two precious metals was owing to a
rise in the value of gold.

" They reported as follows : — .... 'In order to
ascertain whether silver has fallen or gold risen since
1873, not relatively to each other, but relatively to all
other things, a comparison must be made between
general prices in gold and silver respectively, then
and now* Such a comparison would show that the
purchasing power of gold has increased since then in
all countries, and that the purchasing power of silver
has decreased in none/

" Startling as this statement appeared at the time,
there were even then many facts which tended to
support the conclusion arrived at by the American
Commission. . . . To say the least, silver had not

io THE STANDARD OF VALUE.

fallen in value in India. And it is equally manifest
that there had been a considerable diminution in the
value of silver compared with gold. . . . There had
been no depreciation of silver in India, but an ap-
preciation of gold. And this is the view of the
matter at present maintained by the Government of
India.

" The American Commission maintained that this
state of matters was universal — in their own words :
'that the purchasing power of gold has increased
since 1873 in all countries, and that the purchasing
power of silver has decreased in none/ "

To the views so clearly expressed throughout the
article in the Edinburgh Review from which I have
quoted, I will add a short piece of evidence as a
practical indication of a rise in the value of gold in
England.

According to the Board of Trade returns the total
value of British and Irish produce exported in 1872
was 256,250,000/. sterling, and in 1880 223,060,000/.

But the Economist of 19th November last gives the
relative value of the exports for those two years, if
calculated at the same prices, as 220,490,000/. in 1872,
and 258,520,000/. in 1880.

This shows that there was an increase of 17 per
cent, in the quantities exported, though there was an
apparent fall of 13 per cent in the total value
exported.

This shows a fall of 26 per cent, in the average

MONE Y VALUE OF EXP OR TS. 1 1

prices of the exports ; which is equivalent to a relative
rise of 35 per cent, in the value of the pound sterling
by which the value of those exports is measured.

It seems almost self-evident that this change in
nominal value must be in a great degree due to a rise
in the absolute value of the pound sterling rather
than to such a wholesale fall in the absolute value of
the articles exported ; and almost forces on us the
conclusion, suggested by the evidence I have ex-
tracted from the Edinburgh Review, that though gold
has risen only 1 5 per cent in relation to silver, its rise
in absolute value is greater.*

This conclusion can be corroborated in a very
simple manner ; for as it is notorious that the closing
of the mints against silver has prevented a very large
increase of silver coins from being effected, it is
evident that the refusal to allow silver the same un-
limited coinage as gold, has not only caused a relative
rise of 1 5 per cent in the value of gold as compared
with silver, but has, at the same time, indisputably
given a higher average value to gold and silver coins
than they would otherwise have, and almost certainly

* "The unprecedented continuance of low prices for several years
past has not been confined to this country, but has been more or less
general throughout Europe, where it has not been counteracted, as was
the case in France in 1S80, by more notes being issued. Simultaneously
with the spreading of the existing stock of gold over a larger area, the
supply from the mines has undoubtedly been smaller of late years, and
the consequence has been an appreciation of the metal. 1 ' — A Review of
the Position and Prophecies of the Bimetallism. By Arthur Crump.
London, Effingham Wilson, 1882, p. 22. Note to this Edition.

12 THE STANDARD OF VALUE.

caused an absolute rise in that average value, by pre-
venting the supply of coin from being equal to the
increased requirements for it.

Taking this latter effect into consideration in con-
junction with the previous evidence, it seems indis-
putable that Lord Liverpool's system has had the
practical effect of raising the absolute value of the
pound sterling at least 1 5 per cent, and perhaps even
to the extent of 20 per cent, or more.

It thus appears that 15 or 20 per cent, higher
taxation is required to meet the interest on the
National Debt than would be required if Lord Liver-
poors system had not been established. That system
changed the standard of value under which the money
was borrowed, and has made it requisite for the
debtor to pay 1 5 or 20 per cent, more than the value
due under the original compact : the change of the
standard of value being equivalent to an increase of
the National Debt which, as above shown, may
reasonably be estimated at not much less than
150,000,000/. sterling.

How can any thoughtful man fail to perceive the
injustice of such a system and the national loss it
inflicts ?

IV.

With a view to remedy the acknowledged evils
of the present position, Her Majesty's Government
now offer to bind themselves, by agreement with

HER MAJESTY'S GOVERNMENT. 13

other nations, to keep the Indian mint open for the
unlimited coinage of silver if a number of the principal
States will bind themselves to keep their mints open
for the unlimited coinage of both silver and gold.

This is really tantamount to a declaration to the
effect that Her Majesty's Government will passively
leave it to other 'Governments to decide whether those
other Governments will or will not remedy the in-
justice done to ourselves by our own Parliament For
though the practical establishment of bimetallism at
the former ratio, by any nation, would practically
remedy that injustice ; and the rejection of gold coins
for silver coins by other nations might even make the
gold pound sterling less valuable than the silver
pound ; the unlimited coinage of silver by the Indian
mint (in the absence of such action by other nations)
cannot have any effect on the absolute value of the
gold sovereign, but must tend to increase the differ-
ence between the relative value of the gold sovereign
and the silver rupee.

The peculiarity of the position is unique. The
British Parliament first create an immense amount of
debt under a certain standard of value ; then, in a
perfectly arbitrary manner, they change that standard
of value. This change brings about an obvious and
serious injustice to the British nation to the benefit of
the British bondholder, and acknowledged embarrass-
ment and heavy loss to the Indian Government A
restoration of the standard of value under which the

14 THE STANDARD OF VALUE.

debt was contracted forms an obvious remedy for these
evils ; and, under these circumstances, Her Majesty's
Government declare themselves prepared, by Indian
legislation, to assist such legislation by foreign powers
as may bring about a practical restoration of that
standard of value, but they will not themselves legis-
late for its legal restoration in England.

The reason for this peculiar course seems to be a
prevailing opinion that the restoration of the former
equilibrium is more requisite for the benefit of India
and some foreign nations than for that of Great
Britain. This opinion results from a misunderstanding
of the actual situation.

The Indian Government requires an increased
amount of revenue, because a part of their expendi-
ture is payable in the pounds sterling which have
been raised in value, and the Indian nation have
therefore that extra burden laid on them. But their
currency has not suffered the important change in
value which the English currency has experienced ;
and though the extra amount to be raised by taxes
causes great embarrassment to the Government, it is
not so great as to form a great national calamity. In
this India suffers in the same manner as England
suffers by having to pay an increased value of interest
on the National Debt in consequence of the increased
value of the pound sterling.

But, besides this, England has been involved in
disasters by which India has not been touched ; for

MONEY VALUE OF LAND. 15

the rise in the value of the English currency has not
only created confusion by altering the value of all
contracts, but has also disorganised trade and indus-
tries of all descriptions, so that it is not India but
Great Britain that has been the chief sufferer from the
repudiation of silver.

It is asserted by many that the bad harvests
experienced recently are the cause of the fall in the
value of land, but the recent legislation for Ireland
sufficiently proves that that is not practically accepted
by Parliament as the cause. And, is it more likely
that tenants have, in a wholesale manner, contracted
to pay 1 5 to 30 per cent, more rental than their lands
are worth, than that the value of their contracts has
been increased by the increase of the value of the
pound sterling indicated by the evidence already
referred to ?

Is it not more reasonable to regard the difficulties
experienced by tenants in paying their rents as
further evidence of the increased value of the pound
sterling ?

The simple reason for making only gold coins
full legal, tender in England is clearly given in the
extract I have given from Lord Liverpool's work.
But what are such considerations worth when weighed
against those to which I have just alluded ? Or what,
indeed, are any considerations based on commercial
convenience worth when weighed against the rights of
the national debtor ?

16 THE STANDARD OF VALUE.

V.

Lord Liverpool's oversight in not perceiving that
the abolition of the silver standard changes the value
of the gold standard is made strikingly apparent by
the fact that, throughout his long letter, he only once
alludes to the question of the National Debt, and that
when he makes this allusion he does so for the purpose
of pointing out that the bondholders have no reason-
able ground for objecting to the change from the
double to the single standard.

His Lordship does not appear to have noticed that
though the national creditor had no reason to object
to the change, seeing that it deprived him of no right
which he previously possessed ; the national debtor*
on the other hand, had good reason to object, seeing
that it deprived him of the right to pay in silver ; and
if it were not that the debtors were too ignorant to
understand the value of the right of which Lord
Liverpool proposed to deprive them, they would
doubtless have made their voices heard in such a
manner as to prevent the perpetration of the injustice.

The glaringly one-sided character of Lord Liver-
pool's arguments on this point makes it almost appear
that though he was writing just after the close of the
great war with France, he had not learned the lesson
taught by the scenes of anarchy in which the French
nation had been involved in consequence of their

LORD LIVERPOOL'S OVERSIGHT. 17

nobility having persistently acted as . if they .consi-
dered that no injustice could be done to the labouring
classes, seeing that they had no right to be injured.

His Lordship was very careful to point out that
his proposed measures could not injure the national
creditor ; and, having decided this point, he does not
seem to have thought it worth his while for a moment
to consider whether those measures would or would
not injure the national debtor. His arguments on this
point are those of a special pleader for the enhance-
ment of the value of the bondholder's property, and
not those of a statesman endeavouring to mete out
impartial justice between the nation, which had just
been so heavily burdened with debt, and the nation's
creditors, whose loans had brought a desperate war to
a successful conclusion.

Those loans, which formed nearly three-fourths of
the whole debt, had been issued at an average price of
about 60 per cent. — that is to say, the nation acknow-
ledged an amount of debt about 66 per cent, greater
than the amount of capital received ; and besides this
the money was received in paper, which was then
depreciated to an extent variously estimated at dif-
ferent times at from 10 to 30 per cent. ; and, indeed,
at one time estimated by some as depreciated to the
extent of 50 per cent.

Neither the extent of this depreciation, nor the price
at which the loans were issued, directly concerns my
present argument. I allude to these points merely to

C

18 THE STANDARD OF VALUE.

show that if, at the close of the war, specie payments
had been resumed under the same standard of value
which existed before the war commenced, the bond-
holder would have been very handsomely rewarded
for his patriotism. To the profit made on his depre-
ciated paper he was fairly entitled, because at the
commencement of the war specie payments were not
abolished, but merely suspended, it being understood
that the paper notes would be redeemed at par in
case of a successful termination of the war. And to
the profit made on the price of issue he was fairly
entitled also, seeing that it formed an explicit con- lf
dition of the loan. But these enormous profits he
would equitably have obtained by a return to specie
payments under the standard of value which existed
when those specie payments were suspended.

The resumption of specie payments under the sole
gold standard instead of the double standard, changed
the debt of 850,000,000 pounds sterling into a debt of
the same number of gold sovereigns, which are worth
1 5 per cent, more than the silver pound sterling, and,
as before shown, at least 15 per cent., and perhaps
20 per cent., more than the pound sterling would be
worth if specie payments had been resumed under the
previously existing double standard.

LORD LIVERPOOL'S OVERSIGHT. 19

VI.

The same oversight which kept Lord Liverpool from
perceiving that the abolition of the silver standard was
an alteration of the standard of value which practically
enhanced the value of the pound sterling, is apparent
throughout the historical portion of his letter, notwith-
standing that we find in one of his paragraphs such
well judged statements as the following (p. 151).
His Lordship says : —

" From the time when gold coins were introduced
into currency .... the pound sterling in tale repre-
sented a certain quantity or weight of standard gold,
in like manner as it represented a certain quantity

or weight of Standard silver And from that

time the gold and silver coins were in fact, as well as
by law, equally the measure of property."

But his Lordship afterwards goes on to say :—

" It sometimes happened, however, that both gold
and silver coins were, by various causes, alternately
driven, in a great degree, out of circulation ; and one
of them remained in currency, and became in fact the
principal measure of property."

Thus Lord Liverpool says, the gold coins having
been driven out of circulation : —

" From the year 1663 the silver coins became in fact
the only principal measure of property."

And, in 1805, he says : —

"The gold coins are now become, in the practice

C 2

20 THE STANDARD OF VALUE.

and opinion of the people, the principal measure of
property."

His Lordship really does not seem to have perceived
that though at one of those epochs chiefly silver, and at
the other chiefly gold was in. circulation in England,
the two metals were nevertheless at all times jointly
the measure of property, both by law and in fact ; for
debtors could suit themselves as to which metal they
reserved for their home debts, and which they ex-
ported for their foreign debts. The one metal rather
than the other being kept in circulation in England,
instead of being exported, depended on the changes
of the relative value arbitrarily given to the metals at
the respective mints. The " measure of property " was
not affected by these changes of the relative value of
the two metals at the respective mints, but remained
the same double standard measure,* though the chang-

* "I consider perfect exactness of ratio a matter of very little
moment. If you adopt 18 to I you overvalue gold ; but the only
practical result, except at the instant of change, is that you contract
the circulation of the world. If you adopt 15} to i, then, even on the
supposition, which I do not admit, that by this ratio you undervalue
gold, the only practical result is that you re-expand the circulation of
the world to the point at which it stood in 1873." Henry H. Gibbs,
October 7th, 1882. Occasional Papers issued by the International
Monetary Standard Association, No. 2, p. 3. A change from the ratio
of 15} to I to that of 18 to 1 might, as a matter of theory just as well
cause an " expansion " as a " contraction " of the circulation ; and, as
a practical matter, the change, if it is to be effected, is more likely to
result in expansion than contraction. Because, in the first place, this
depends on the mode in which the change of ratio is effected ; if this is
done by changing the weight of the silver coins then there will be
contraction ; but if by changing the weight of the gold coins then there

LORD LIVERPOOL'S OVERSIGHT. 21

ing prices and charges at the different mints made any
given mint sometimes the best market for gold, and
at other times the best market for silver. If every
mint had been either only a gold mint or only a
silver mint, then in some countries gold alone, and in
other countries silver alone, would practically have
been the measure of property, instead of the two
metals jointly being the measure of property in all
countries.

For these reasons also, notwithstanding that the
double standard was abolished by law in England in
1 8 16, gold and silver nevertheless continued in fact to
be jointly the measure of property ; because, though
the English mint coined only gold, the holder of
silver could always get the equivalent of the silver
pound sterling in the gold pound sterling as long as
the French mint was an open and unlimited market
for silver at that relative value. This continued to be
the case until the French mint was closed against
silver in the year 1873 ; and then, for the first time,
gold and silver became two separate n^easures of

will be expansion. And, secondly, if such a change of ratio should be
determined on, the French mint would be much more likely to change
the weight of the gold than of the silver coins, as I have suggested
farther on in this chapter. The change of ratio would affect the
standard unit in each country according to the mode in which each
country effected the change of ratio, but it would not affect the
standard of value itself. This is intrinsically the same question as that
which I have pointed out as not having been understood by Lord
Liverpool. — Note to this Edition. See also foot-notes, page 63 and
page 114.

22 THE STANDARD OF VALUE.

property, and gold alone, instead of gold and silver
jointly, became practically, as well as by law, the
principal measure of property in England ; and this
sudden alteration of the measure of property almost
immediately brought about a fall in the money value
of land, and also, as before shown, of the aggregate of
the money value of our exports ; whilst at the same
time fixed amounts in money, such as land rents and
the National Debt, were enhanced in value.

As Lord Liverpool did not understand that though
at one of the epochs alluded to by him silver was
chiefly in circulation, and at the other gold, the two
metals were nevertheless at both epochs jointly the
"measure of property"; he therefore overlooked -the
fact that the abolition of the silver pound would
naturally tend to enhance the value of the gold
pound,

VII.

It was Jpecause the members of the Paris Conference
of 1867 did not understand the nature of the over-
sight made by Lord Liverpool that they began the
propaganda for the general repudiation of silver, and
the extension of the gold standard to all countries.
And the German Government soon afterwards re-
moved the question from the domain of theory, by
initiating the practical application of the views
advocated by the Paris Conference.

POSITION OF THE FRENCH MINT. 23

The late Mr. Ernest Seyd and perhaps not more
than half a dozen other bimetallists stood at first alone
as opponents of the course advocated by the Paris
Conference, regarding which I remarked when I had
the honour of addressing you on this subject, two
years ago : — " No such gigantic, bold, and mischievous
injustice has ever before been attempted in the history
of the world." I am glad to say that there is not now
the vestige of a chance of the attempt to perpetrate
that injustice being continued. For the victory of the
bimetallists on that point has been complete, and the
course advocated by the Paris Conference has now no
defender. The repudiators of silver are completely
defeated as regards the question of any further
repudiation, and the question now at issue is as to
whether silver is to be restored to the position it held
before the first act of repudiation was effected by
the British Parliament, under the advice of Lord
Liverpool.

The rapid and complete collapse of the repudiators,
on what is really the main point, has brought about
an all-important change in the practical position of
the question, which does not appear to have been as
yet clearly recognised by either party.

For it was the prospect of further attempts to
repudiate silver that caused the French mint to be
closed against it. But now that that prospect has
vanished, the French mint might at any moment
resolve to abandon any further attempt to restore the

24 THE STANDARD OF VALUE.

recent rate between silver and gold, and reopen for
the unlimited coinage of silver, in exactly the same
coins as are at present current, sharing with the holders
of French gold coin enough of the profit on its
• recoinage, at a new ratio in respect to silver, to pay
the cost of recoinage.

Creditors on all current contracts would have the
legal right to insist on payment in silver rather than
in gold at the new rate of issue ; but on all subsequent
contracts both gold and silver, at the new rate of
issue, would be equally legal tender. This would not
deprive either debtors or creditors of any right they
at present possess. And the consequent fall of the
French currency in the foreign exchanges, which
would follow the recoinage of gold, and which would
be no loss to the country in general, would merely
constitute a return to the intrinsic values represented
by the quotations of exchange before the gold coins
became enhanced in value by the closing of the mint
against silver. The premium virtually, though in the
greater part insidiously, paid by England and Ger-
many in the determination to have gold rather than
silver in their circulation, is the true though indirect
source of the profit which the French mint can now
obtain on the recoinage of gold.

As regards purely theoretical principles, the course
I have suggested for the French mint would not
intrinsically differ from what has occurred over and
over again, on a smaller scale, in the practical working

THREATENED COMPLICATION. 25

of the double standard; and, by that course, the
double standard of gold and silver would again practi-
cally become the measure of value in all countries,
though some might continue to have the gold, and
others the silver standard, established by law.

That France, and other recently bimetallic countries,
will be forced to some such course as that just in-
dicated if the question should be allowed to drift
much longer, I have no doubt. For, though it seems
to me quite possible that France might be able to
restore the old ratio without the assistance of Eng-
land, there is no sufficient reason why that country
should run the risk of failure in the attempt to do so.
And one important reason why England should take
the initiative in such a manner as to prevent a new
rate between gold and silver from being permanently
established, is to be found in the fact that 1858 grains
of standard silver are legal tender for each pound
sterling of the National Debt, under the terms on
which that debt was contracted, whereas such a new
ratio would make the gold sovereign, which is* now
the only representative of the pound sterling, worth
permanently much more than 2000 grains of standard
silver. In this manner a gordian knot would in-
sidiously be formed in our national finances, and
would become an increasing source of contention.

It is not yet too late to prevent the binding of such
a knot. But if once the recoinage should be under-
taken by France, then international commerce will be

26 THE STAND A RD OF VALUE.

just as well served by the double standard under the
new ratio of gold and silver, but our own finances in
England will be involved in a mess, of which it is
impossible to foresee the issue.

VIII.

Financial history shows that the double standard
originated in, and established itself by the slow and
unperceived process of natural selection, which will
also reinforce it, notwithstanding the temporary dis-
turbance to which it has been subjected by the
tampering of Lord Liverpool and his followers.

Prominent in the ranks of that party stands Lord
Sherbrooke, who, in a recent number of the Nine*
teenth Century Review, candidly tells us that he
does not know what bimetallism is. But Lord Sher-
brooke forgets that, some years ago, when he was Mr.
Lowe and Chancellor of the Exchequer, he told us
that,- in advocating the double standard, we did not
say what we meant, and that what we really meant to
advocate was an alternative standard. Thus, some
years ago Lord Sherbrooke not only professed to
understand what bimetallists want, but professed to
understand it better than we do ourselves.

The fact is, however, that Lord Sherbrooke confuses
alternations of gold and silver currency with alterna-
tions of the standard of value, Lord Sherbrooke, like

MR. H. R. GRENFELL. 27

Lord Liverpool, not understanding that all alterna-
tions of currency before 1873 took place under the
same double standard of value, as I have endeavoured
to make apparent in this paper.

The term Double Standard is the natural and most
correct expression that can be used for our purpose.
And, though an Alternative Standard is a theoretical
possibility, that is not what bimetallists want. What
we want is the double standard of value which practi-
cally existed from time almost immemorial up to the
year 1873.

Necessity will re-establish that standard at a ratio
inconvenient to us if we do not re-establish it at the
ratio which was disturbed in 1873. And we merely
want Parliament to re-establish by law at a convenient
ratio, the standard which will otherwise restore itself,
in spite of us, at an inconvenient ratio.

IX.

Among the recent accessions to the cause of bi-
metallism is Mr. Grenfell, the Governor of the Bank
of England, who has evidently been led over by
practical considerations of commercial convenience,
not having been an advocate of the double standard
when it was a subject of purely theoretical disqui-
sition.

On this account Mr. Grenfell says that "to recog-
nise the standard of value in international exchange

28 THE STANDARD OF VALUE.

is more important than to regard it in its relation
to interior currency : " as if it were possible to have
an international standard which was not also the
standard of the interior currency of each of the
nations included under the term international. A
little reflection will I am sure induce Mr. Grenfell to
admit, that the double standard of gold and silver
cannot be maintained by any nation without becoming
also the standard of value of the interior currency of
all nations who have either a gold or a silver currency,
whether those nations may be conscious of the fact or
not ; and the double standard becomes the inter-
national standard simply because it is the standard
of value in the interior currency of each nation.
They have an international standard because they
all have the same standard practically though not by
law.

On this same principle also, if, before the repudia-
tion of silver, platinum had been made unlimited
legal tender by any nation retaining also either gold
or silver in its circulation, then, not only the inter-
national standard, but also the standard of the interior
currency of each nation would be a treble standard
"dependent on the combined value of gold, silver, and
platinum, and not on that of any one of those metals
alone. The paramount objection to the legal estab-
lishment of a platinum standard in England is the
fact that such a law would constitute a breach of faith
with the national creditor exactly similar to the

MR. H. R. GRENFELL. 29

*

breach of faith with the national debtor which was
caused by the parliamentary repudiation of the silver
standard in 18 16.

It has become an acknowledged truth that a double
standard has greater fixity of value than either a gold
or a silver standard, and it must become acknow-
ledged that any international standard is also, of
necessity, the interior standard of each nation.

Such a change of ratio in the double standard as
might cause no perceptible change of its value might
nevertheless cause great change in the standards
of those countries that had only the gold or only the
silver standard established by law. But no change in
the international standard can be effected without at
the same time changing the value of all the interior
standards ; and therefore if an international standard
exist at all, it will of necessity have at least as much
fixity of value as the legal standard of the interior
currency of any individual nation.

It follows from this that a double standard country
may retain the fixity of its standard whilst causing
sudden and enormous changes in all monometallic
standards, by changes of ratio made requisite for the
maintenance of its own standard. Thus monometallic
countries are subject to an influence of foreign legis-
lation which they cannot themselves exert abroad.
And the greatest fixity of value in an interior currency
is to be obtained by admitting into the circulation
whatever metal may be unlimited legal tender in any

30 THE STANDARD OF VALUE.

other country, thus making the international standard
both by law and in fact the interior standard.

If all nations but one were monometallic, and each
with a different metal, then the one country could
make a profit by keeping its mint open for the
coinage of all those metals at changing ratios, and
thus establish an international standard which would
also be its own standard, and might retain a con-
stant fixity of value whilst all other countries had
their standards subjected to constant fluctuations
of value.

The great error made by the Paris Conference of
1867 in advocating the repudiation of silver seems to
be generally understood. But it is not fully recog-
nised that if each individual nation be free to choose
whatever metal it imagines to be best for its interior
standard, then an international standard will of neces-
sity in the course of time grow out of, and conform
itself to, those individual arrangements.

It is a hopeless task to endeavour to make indivi-
dual nations conform themselves to any international
standard artificially invented, though an enlightened
self-interest must gradually lead each one to conform
itself to whatever international standard may gradu-
ally establish itself by force of circumstances.

For this reason the Paris Conference of 1866 ought
to have been satisfied with the practical simplification
of coinage, which they could have achieved at »the
ratio of 15 J to 1 between silver and gold ; and, for the

GRATUITOUS COINAGE. 31

purpose of making that ratio absolute, they ought to
have advocated the legal extension of the double
standard, by showing it to be for the self-interest of
individual nations to make their legal standard
conform itself to the standard which had established
itself in practice. Instead of this, they made the
mistake of endeavouring to induce individual nations
to submit to the manifest inconvenience of changing
the metal in their circulation for the sake of an
asserted international benefit.

Not only is international legislation unnecessary for
the purpose of establishing an international standard,
but, judged by the abstract principles of free trade,
such legislation would be a practical evil in many
respects. One evil effect is to be found in the fact
that it would almost necessarily be based on an agree-
ment making it obligatory for each nation to continue
the extravagant system of free as well as unlimited
coinage, though there has ceased to be any sufficient
reason for giving a bounty on gold and silver mining,
in the shape of free coinage, rather than a bounty on
iron mining, in the shape of free fabrication of useful
instruments of that material. Gold and silver would
flow to the mint quite fast enough without any such
bounty.*

* " No valid reason can be alleged why the owner of gold bullion
should have it manufactured for him gratuitously into sovereigns or
half-sovereigns, rather than that it should be gratuitously manufactured
for him into dessert-spoons or teaspoons. The Economist newspaper

32 THE STANDARD OF VALUE.

X.

Many, even among professed bimetallists, consider
that the restoration of the silver standard by the
British Parliament at the recent ratio of 15^ to 1,
would be tantamount to the exclusion of gold coin
from England. The effect of such a measure is, how-
ever, a purely practical question, to be judged by the
condition of the currencies and the interests of other
nations ; and it still remains as clear to me as when
I last addressed you that, if England moves in the
matter before the French mint undertakes to issue
gold and silver at a new ratio, we may, even without
any international treaty on the subject, make Mr.
Seyd's 4s. coin, containing 350*305 grains of silver, as
well as the gold sovereign, unlimited legal tender, in
full assurance of the action of such a measure being
supported by the French and American mints for
their own convenience.

But, whatever may be our opinion on this point, I
beg to impress on you the fact that the existence of
our National Debt makes the coining of silver a
question of right and justice, against which the ques-
tion as to the comparative convenience of a gold or a
silver standard ought not for one moment to be

(March 3rd, 1883), referring to this subject, shows distinctly that the
fact that our gold coinage is gratuitous has hitherto had apparently no
effect on the import of gold into this country." — Quarterly Review,
April, 1883, pages 499 and 500. — Note to this Edition.

THE STANDARD OF VALUE. 33

weighed in the balance. And, in conclusion, I humbly
express the opinion, which is shared in by all who
advocate bimetallism, to the effect that our wealth and
prosperity are not in any manner due, as many sup-
pose, to the establishment of our gold standard of
value, but have rather been achieved in spite of the
establishment of that standard. We are, indeed, con-
vinced that that wealth and prosperity would be greater
than it now is if the " ancient standard of the realm "
had not been tampered with in the manner advocated
by Lord Liverpool.

D

34 THE STANDARD OF VALUE.

NOTE TO THIRD EDITION.

Whilst this Edition has been in the hands of the
printers, Mr. Crump has published a letter attacking
the views expressed by Mr. Goschen in his recent
Address to the Bankers' Institute, " On the Probable
Results of an Increase in the Purchasing Power of
Gold," and Mr. Crump -concludes his letter as
follows : —

"It would appear, then, from the evidence here
adduced, that Mr. Goschen has been too hasty in
attributing the fall of prices during the last ten years
to an appreciation in the value of gold ; that the fall
is not to any material extent attributable to such ap-
preciation, but that it has been the result of other
causes to which I have referred." — Economist, May
igth, 1883.

The extract which I have given, on page 11, from
Mr. Crump's previous work, admits a sufficient ap-
preciation of the value of gold for the purpose of my
argument on that point. And besides this, Mr. Crump's
writings do not touch the main points of my argu-
ment.

London, May 26M, 1883.

THE DOUBLE STANDARD

AND

THE NATIONAL DEBT!

A Paper read before the English Literary Society of Buenos
Ayres on the 28th of July, 1880, in support of the following
propositions : —

" /. That the general adoption of Bimetallism is desirable and
practicable,

" 7/. That duty and expediency both urgently require the re-
adoption by England {with or without the joint action of
other nations) of the principle of Bimetallism which was
abolished by the British Parliament in 18 16 in favour of
the gold standard?

D 2

THE DOUBLE STANDARD

AND

THE NATIONAL DEBT.

In the paper I have prepared for reading this evening
I have preferred to run the risk of being tedious
rather than the risk of not being understood ; and
therefore it may perhaps appear, as I read, that the
same ideas recur too often. If so, I must ask you to
excuse such repetitions, on the ground that ideas,
when not at first understood, may be so when repeated
in a different combination of words.

In the paper * read before you on the 26th of May,
Mr. Barclay pointed out : —

First; that, " Prior to 1874, bimetallism was practi-
cally in force for all the purposes of international com-
merce. Individual nations had different standards ;
but, owing to the uniform relative value of the two
metals, silver and gold throughout the world formed
practically one mass of metallic money, and the par

* ' Bimetallism ; ' a paper read before the English Literary Society,
Buenos Ayres, by Robert Barclay, Esq., of Manchester. Published by
the Author, at the request of the Society, and edited by the President,
William Leighton Jordan, F.R.G.S.

38 THE STANDARD OF VALUE.

of exchange between a gold country and a silver
country, was for all practical purposes a fixed value,
varying almost as little as if all the nations of the
world had one metal alone as the standard of value."
Though in one group of States, .including England,
only gold, and in another group, including Germany,
only silver was legal tender ; nevertheless, as a third
group, including France, accepted either gold or silver
indiscriminately as offered for coinage at the rate of
15^ lbs. of silver to I lb. of gold, the relative value of
the two metals in any country could not vary from
that rate beyond the percentage requisite to cover
the cost of sending one or the other metal to the
French mint for coinage.*

* Mr. Gibbs considers that a bimetallic law in France must keep
the price of silver in the London market "at a point dependent not at
all on the power of getting gold from France, or on the agio which may
be paid for it there, but on the course of exchange between the two
countries."* Though the price of silver in London must be affected
by the course of exchange, because if it were not so, then the value of
gold in London as compared with the value of gold in Paris would
vary more than the relative values of gold and silver ; still the opinion
I have placed above in italics appears to me to be decidedly erroneous,
for any agio on either metal in Paris, must of necessity, under any
circumstance, tend to make itself felt in the market price of silver in
Lpndon, though the effect of such an agio might be for some time
either counteracted or increased by the course of exchange.

It is a mere matter of fact that before 1873 & e g°^ price of silver
in London did not fluctuate more than the gold price in foreign
markets of gold bills on London ; thus showing that for all practical
purposes the value of gold and silver before 1873 fluctuated jointly,
any supply of either metal affecting the value of both metals, and not
that of the one metal only.

* * The Double Standard.' By Henry H. Gibbs, London, 1881, page 34.

'•W

THE LATE EARL OF BEACONSFIELD. 39

Secondly; that, "In the year 1867, a number of
currency reformers met in Paris with the idea of dis-
cussing some system of universal currency by which
the coins of all nations might be harmonised. These
reformers, however, found that a serious obstacle to
the realisation of their schemes existed in the dif-
ferent standards of value which the leading nations
had adopted, and from that time there began a
propaganda in favour of gold monometallism. The
English system was regarded as the best, and English
commercial prosperity was supposed to have resulted
largely from her monetary system." *

The argument in the text supposes the double standard to prevail
in France practically as well as legally. Immediately there was a
practical alternation from the double standard to the silver standard in
some countries and to the gold standard in others ; then the price of
silver fell in London in proportion as quotations under the gold standard
fell in relation to those under the silver standard.

There were certainly no practical alternations of the standard of value
before the English law of 18 16 was passed ; and if there were any
alternations between that date and 1873, ^ e fluctuations in the
difference between the gold and silver standards were so slight as to
have no important practical effect on the valuations of property or
income. It is only since 1873 t ^ iat tne two standards haye separated
to an extent which involves serious consequences.— Note to this Edition,

* The following interesting extract from a speech delivered in 1873
by the Right Honourable Benjamin Disraeli, now Lord Beaconsfield,
appears in Mr. Ernest Seyd's work on * The Decline of Prosperity.'

" I attribute the great monetary disturbance that has occurred, and
is now to a certain degree acting very injuriously to trade — I attribute
it to the great changes which the Governments in Europe are making
with reference to their standards of value. ... I think that any
country which has a gold standard of value should, to use a celebrated
expression, think once, twice, and thrice, before it gives it up. But it
is the greatest delusion in the world to attribute the commercial pre-
ponderance and prosperity of England to our having a gold standard."

40 THE STANDARD OF VALUE.

Thirdly ; that the foregoing suggestion was not acted
on until the year 1872, when Germany commenced
to change from the silver to the gold standard.

An unusual demand was thus created for gold ;
whilst at the same time the supply of silver from the
coins discarded by Germany and thus thrown on the
market was further increased by an unusually large
supply from the mines. This combination of disturb-
ing causes led the French authorities to fear that the
action of the French mint would not be sufficient to
sustain the established rate between silver and gold,
which might, notwithstanding their action, be altered
to a rate of 20 or 30 to 1. And therefore, seeing that,
under their then existing regulations, all the gold
absorbed by Germany would practically be withdrawn
from France and other bimetallic States in exchange
for an equivalent quantity of silver at the rate of
x 5t to 1, the French authorities refused to receive
silver for coinage and accepted only gold.

Thus the action of both France and Germany
created an unusual demand for gold, whilst at the
same time the one threw silver on the market, and
the other closed a source of consumption previously
existing for it.

The market price of silver soon fell rapidly from
the former par rate of 6orf. per oz. ; and it then
became evident, even to those who had not previously
perceived the fact, that (to use Mr. Barclay's words) :
" The bimetallic system of France with its free coinage

SIL VER REJECTED A T THE FRENCH MINT. 41

of silver for all comers had linked gold and silver
together not for France only but for the world, until
the fear of an inundation of silver from Germany
made her close her mint. Her bimetallic system gave
way, after bearing many a strain, under a pressure it
was never intended to bear."

It is a disputed point among financiers whether, if
France had kept her bimetallic law in action, instead
of prudently suspending the coinage of silver, the
unusually large supply which was thrown on the
market would not all have been absorbed without
any disturbance of the relative value of silver and
gold.

It seems to me that Mr. Barclay underestimates, or
certainly does not overestimate, the controlling power
of the French bimetallic law. For reasons which I
shall presently give, I cannot myself doubt that if the
latter law had been kept in force its influence would
have been more than sufficient to sustain the equili-
brium between silver and gold notwithstanding the
tendency of the new German law to enhance the
value of gold and depreciate the value of silver. The
French mint might have coined double the amount of
silver which could possibly have been sent there by
Germany, without causing any disastrous incon-
venience in France.

And as regards the danger of the equilibrium being
disturbed by the new supplies of silver : the fact is
that during the twenty- two years from 1848 to 1 870,

42 THE STANDARD OF VALUE,

with free coinage for silver, there were 60 million £
coined all over the world, so that at that rate, if the
whole supply offered for coinage were taken to the
French mint only, and were not able to pass from
France into the circulation of other countries, even so
it would take one hundred years, even under such
practically impossible conditions, for the supply of
silver to displace the gold circulation in France.

The real danger to France lay in the fact that the
adoption of the gold standard by Germany was only
a first step in favour of the universal adoption of gold
monometallism ; and on other nations with silver
standards following the lead of Germany, then the
combined influence would have been more than could
be counteracted by France. Silver would then have
depreciated after having taken the place of the gold
circulation in France, just as it actually did depreciate
on the French mint being closed against it; and
therefore it seems to me that the French authorities
showed sound judgment in suspending the action of
their bimetallic law.

The idea that France with 260 million £ of gold
and 70 million £ of silver circulation could not have
withstood the sole influence of Germany in discarding
at the most 60 million £ of silver, and able to absorb
at the most 100 million £ of gold, seems to me to be
a mistake.

These are, however, mere matters of opinion which
I express for the purpose of illustrating the subject.

DEMONE TISA TION OF SIL VER. 43

What is not doubted by any one is the fact that if
England and Germany had in 1867 adopted the same
bimetallic system as France, there would never have
been any danger of the derangement in the relative
value of silver and gold which has occurred.

This being so, it is then evident that if all the
principal commercial nations adopted the French
bimetallic law, the relative value of gold and silver
would be maintained at the rate of 1 Si to 1 without
any practical risk of derangement.

I will not dwell further on Mr. Barclay's arguments
for the purpose of showing the practicability of bi-
metallism if generally adopted. Its desirability is
roughly, but concisely, stated by Mr. Barclay in the
following words : —

" If silver were everywhere effectually demonetised,
this would reduce the metallic money in the world to
£700 millions of gold, and as this £700 millions would
have to do the exchange work which is at present
done by ;£ 1400 millions of the two metals, its value
would be correspondingly increased. One sovereign
would have the same purchasing power as two
sovereigns now have, prices of commodities would
seem to fall to this extent in relation to money, but
in reality it would be that money had become en-
hanced in value owing to its scarcity. It requires
little demonstration to prove that this would be an
immense evil. The whole balance of values would
everywhere be disturbed; not to speak of the im-

44 THE STANDARD OF VALUE.

mediate loss to the holders of silver, every debtor who
owed gold would have practically double the amount
which he owed to pay. National loans contracted in
gold could not be discharged without the surrender of
double the property which these loans when made
could have bought. In fact, everywhere the debtor
would suffer and the creditor gain. Of course, this is
putting the thing in an extreme light, but it serves to
show how it must work."

The foregoing, it will be observed, is a purely
practical argument based on the fact of both silver
and gold actually being in circulation. And, to the
numerous considerations urged by Mr. Barclay, I will
add a short argument based on facts which show not
only that the bimetallic gives a steadier and therefore
£ fairer standard of value than either the gold or the
silver standard alone ; but also that legislation can
fix the relative value of the two metals in such a
manner as to prevent any variations of their relative
value even under greater variations of relative supply
than have ever hitherto occurred.

In the year 1848 there were 400 million £ of gold
and 600 million £ of silver in circulation. Between
that year and the year 1870, 350 million ;£ of gold
and 60 million^ of silver were added to the circula-
tion. Now, if gold only had been legal tender, the
volume of the metallic currency would have been
almost doubled during those years; but, in conse-
quence of the existence of the silver currency, the

THE LARGE SUPPLIES OF GOLD. 45

increase was only 40 per cent. ; and therefore the
sudden influx of gold caused much less disturbance
than would have occurred if gold only had been in cir-
culation. This is a practical illustration of the manner
in which bimetallism gives a steadier standard than
monometallism.

As paper currency also tends to prevent fresh sup-
plies of coin from effecting an equivalent rise in
prices, it may here be observed that in England there
are about 15 million £ of bank notes which have
practically the same effect in depreciating the pur-
chasing value of gold and silver as if it were ex-
changed for an extra amount of 1 5 million £ in gold
or silver. It is more difficult to judge how much of
the paper currency in many other countries has this
same action ; but allowing all the paper in circulation
to be equivalent in this respect to an amount of
300 million £ in gold or silver, then that paper cir-
culation would have further reduced the disturbing
influence of the discoveries of gold just mentioned to
30 per cent.

That is to say, if the circulation had consisted of
gold only, the new coinage just alluded to would have
nearly doubled the amount of the circulation. If it
had consisted of gold and silver only, the increase would
have been 40 per cent. But as it consisted of gold,
silver, and paper, the increase was only 30 per cent
This latter is merely a rough estimate which I give for
the purpose of illustrating the principles in question.

46 THE STANDARD OF VALUE.

It must also be observed that this allusion to paper
money is really a digression from our main point ; for
its existence merely modifies the action of the
principles involved, and does not affect the intrinsic
merits of the single or the double standard.

To return to the main point, I will ask you now to
mark well the fact that the large influx of 350 million £
of gold was all absorbed into the circulation without
affecting the relative value of gold and silver, because
the currency laws in England and other countries
compelled the mints to receive all gold offered for
coinage at an established rate.

Can it be doubted that if those mipts had then been
closed against gold as the mints have recently been
closed against silver, gold would then have depre-
ciated in relation to silver just as silver has now
depreciated in relation to gold ?

Or, on the other hand, can it be doubted that if the
mints had recently been opened to silver as well as to
gold the present depreciation of silver would have
been prevented ?

It seems to me surprising how any who give due
consideration to the subject can doubt that a bi-
metallic law universally adopted might fix the
relative value of the two metals either at 10 lbs. of
silver to 1 lb. of gold, or at 20 lbs. of silver to 1 lb.
of gold, without any risk of that valuation being
disturbed by differences in the relative supply of
the two metals unless those differences should be

INDEPENDENT ACTION. 47

much greater than anything that has hitherto oc-
curred. The only practical difficulty I see in the
matter is that of inducing all nations to act together.

And the only principle at issue regarding which my
opinion somewhat hesitates, is as to the expediency
of binding ourselves by international treaty, rather
than taking an independent course, guided merely
by what present circumstances may make desirable
for our interests. Granting both the practicability
and the desirability of universal bimetallism, it never-
theless appears to me still more desirable for England
to take the independent course which I am about to
indicate rather than submit to the great delay and
difficulty inseparable from the attempt to induce
other nations to take joint action with us in the
matter.

You have all had the opportunity for reconsidering
the paper read on the 26th of May, in which Mr.
Barclay acts as an able and lucid exponent of the
opinions long since expressed by Mr. Ernest Seyd
and other veterans in the cause of bimetallism ; and I
shall presently ask you to adopt the resolution which
was proposed by Mr. Barclay and seconded by Mr.
Runciman on the 26th of May ; namely : That the
general adoption of bimetallism is desirable and
practicable. By adopting that resolution you will
declare that you consider it desirable that both gold
and silver should continue with equal freedom to
circulate as legal tender money in the commercial

48 THE STANDARD OF VALUE,

world ; and also that you consider that the relative
value of 15^ to I would be practically maintained if
bimetallism at that rate were generally adopted by
commercial nations.

I will now pass on to the second resolution which I
have to submit to you, to the effect that, even if other
nations decline to change their laws, it is nevertheless
both the duty and the interest of England to adopt
the principle of bimetallism, or, as stated in the words
of the Resolution : That duty and expediency both
urgently require the readoption by England (with or
without the joint action of other nations) of the
principle of bimetallism" which was abolished by
the British Parliament in 18 16 in favour of the gold
standard.

As regards the first resolution, I am acting merely
as a supporter of the views expressed by Mr. Barclay
on the 26th of May, and am now endeavouring to
retrieve the defeat which they then experienced.

As regards the second resolution, those who were
present at the last debate on this subject may
remember that the views I expressed met with
Mr. Barclay's opposition. If, however, I can succeed
in clearly stating the argument based on duty, I shall
of course gain your adherence to the second resolution,
even if you should not be able to express your belief
in the practicability of universal bimetallism as
required by the first resolution.

The plea of duty is based on the existence of our

THE NATIONAL DEBT. ' 49

large National Debt ; and it is a subject which I am
not now handling for the first time. Between the
years 1857 anc * i860, when discussing the currency-
question and its bearing on the National Debts which
have been incurred during the last two hundred years,
I frequently commented on the serious difficulties
which might arise from the action of the currency law
established in 18 16. That law made it obligatory for
debtors to pay 123^ grains of standard gold contain-
ing 113 grains of pure gold for each pound sterling
due to the creditor. At the time it was passed it
inflicted no practical injustice on either debtor or
creditor. In principle, nevertheless, it involve'd in-
justice, which in the course of the last five years has
become practical.

To understand the principle at issue, it must be
borne in mind that the pound sterling was formerly a
Saxon pound weight of silver, divided into 240 pence,
just as the pound weight was divided into 240 penny-
weights. The pound Troy was subsequently substi-
tuted for the Saxon pound, thereby slightly increasing
the unit measure of weight But, on the other hand,
frequent reductions were made in the weight of silver
declared to represent the pound sterling. The result
of these changes was that, at the beginning of the
17th century, a pound Troy weight of silver repre-
sented 3^5 of the reduced pounds sterling.

The establishment of the Funding System in the
17th century then made it more than ever the duty of

E

50 - THE STANDARD OF VALUE.

the Government to avoid any further changes of the
accepted standard of value. And in fact, from that
time up to the year 1816, that is to say, all through
the period during which the National Debt of
850,000,000 pounds sterling was incurred, silver con-
tinued to be legal tender, 1 pound weight of standard
silver, containing 222 pennyweights of pure silver,
being coined into three pounds two shillings sterling.

When the first 50 million £ of debt was incurred,
only silver was current as legal tender,* though the
gold guinea was in circulation, and its value as money
became settled by custom at 21s. 6d.

In 1 7 17, at the instigation of Sir Isaac Newton, this
gold coin, which formed practically an important part
of the circulation, was declared legal tender at the
value of 21 shillings.t

* I have in this edition said current as legal tender instead of legal
tender. In the first edition I was guided by the following statements
by M*Culloch in his work on Money ^ namely : " In 1663 the guinea
was first coined and its value varied (though fixed by the mint regula-
tions at the low price of 20f.) silver being the only legal tender" Also
" In 1 71 7 the value of the guinea was reduced by proclamation from
2 1 j. 6d. to 2 1 j. ; both metals being made legal tender" The fact seems
to be that gold was actually legal tender before 1717, though it was
current at conventional rates, higher than its legal tender rate, until it
was made legal tender for 21s. instead of 2ar. It thus appears that the -
double standard was not only established in practice before the com-
mencement of the Funding System, but had also a legal status. —
Note to Second Edition.

t Instead of its original legal tender rate of 20s. " In all the Mint
indentures from the 15th of Charles II. the guinea had been called a
Twenty Shilling Piece, and it was ordered to pass at that rate. But
on this occasion a new indenture was made, dated 6th May, 1718, in
wjiich this piece of gold coin was called a Guinea or a Twenty-one

THE LAW OF 1816. 51

Thus all the debt, when incurred, allowed the
debtor the right of paying in standard silver at the
rate of one pound weight for each 3/. 2s. of debt And
the greater portion allowed the option of paying in
standard gold at the rate of one pound weight for each
46/. 14?. 6d. of debt*

The law of 18 16 deprived the debtor of the right of
paying in silver, and made it incumbent on him to pay
in gold at the above rate ; thus making 113 grains of
pure gold the only legal tender for each pound sterling
in amounts exceeding two pounds.

As from 18 16 to 1874 the relative value of silver
and gold remained at about its previous proportion, no
practical injustice was done to the debtor. But what
I insisted on, in the discussions above alluded to, was
that, as far as human foresight was concerned, it was
a mere matter of chance whether the law of 18 16
could or could not continue to be sustained.

Shilling Piece ; and it was ordered to pass for 21 shillings sterling." —
Lord Liverpool, Coins of the Realm, p. 94. Note to Second Edition.

* The current value of the gold coins, whilst the first part of the
debt was incurred, fluctuated considerably, and was always higher than
the legal tender value until the guinea was made legal tender for 21s.
At one time it was declared illegal to receive the guinea for more than
26s. and afterwards for more than 22s. ; it being throughout that period
legal tender for 2or. Lord Liverpool says (p. 24) "a proclamation was
issued on the 17th December, 171 7, reducing the value of the guinea
from 2 1 j. 6d. to 2U." The value of 21s. 6d. referred to by Lord Liver-
pool was established merely by custom ; for the legal tender value
appears then to have been 2ar., and the maximum value at which it
could legally be received 22J. The guinea does not appear to have
been really legal tender for 21s. until the 6th May, 17 18. — Note to Second
Edition.

E 2

52 THE STANDARD OF VALUE.

If gold continued to be discovered for the coinage
of the gold pound sterling in greater, or in about as
great abundance as it might be coined in silver, then
the practical working of the law of 1816 might be
as good as that of any law on the matter could
be ; for the theoretical injustice involved in it might
have no practical effect But if, on the other hand, it
should become worth the debtor's while to pay in
silver rather than in gold, under the terms on which
the National Debt was contracted ; then the arbitrary
and completely one-sided character of the law of 1816
would, I argued, certainly be challenged, and would
justly fall. For, whatever metal or metals may be
declared legal tender, their unrestricted admission
into circulation as coin is required by equity, seeing
that the growth and extension of commerce and
population require a corresponding increase of coin to
prevent a continuous fall in the general level of
prices;* and also, as a matter of principle, a law
which makes it requisite to use gold for payments for
which it was previously legal to use silver, tends to
enhance the value of gold all over the commercial
world, and to depreciate silver to exactly the same
extent, though circumstances, such as the elasticity of
foreign circulations, and other causes, may prevent
this effect from being made practically apparent by a
change in the relative value of gold and silver.

* The admission of fresh supplies is also required by the practical
difficulty of keeping them out

ENHANCED VALUE OF GOLD. 53

The depreciation of silver, then looked forward to as
a possibility, has become a fact. But this has been
brought about not by the new discoveries of silver, but
by the action of Germany in discarding its silver coins
and replacing them with gold coins.

This is practically a much more serious matter than
a depreciation brought about merely by fresh dis-
coveries of silver.

If the silver currency were depreciated merely by
fresh quantities of the metal being poured into the cir-
culation of those countries in which it is part of the
legal tender, then gold would also be to some extent
depreciated by that addition to the metallic circulation
of which it forms a part. The fresh addition of silver
might thus be an indirect benefit to the debtor, even
though obliged to pay in gold. Under such circum-
stances the only grievance the English national debtor
could have would be that the law of 18 16 had deprived
him of a benefit to which, by the original terms of the
debt, he was entitled.

When, however, a depreciation of the silver currency
is brought about by silver being thrown out of
circulation and replaced by gold, then, just in pro-
portion as silver is depreciated by the increased
supply thus thrown on the market, so also the value
of gold is enhanced by the increased demand thus
created.

The propaganda started by the Paris Conference of
1867 now proposes to demonetise silver and make

54 THE STANDARD OF VALUE.

gold the sole standard of value among all nations.
And as there are 850 million £ of gold and 720
million £ of silver coin and bullion now in circulation,
this idea, if achieved, would enhance the value of the
English National Debt at least 25 per cent. It would
practically form as great an increase of the burden of
the debt as if under existing circumstances a new loan
of more than 200 million pounds sterling were now to
be raised.

The position of the English national debtor is
now, therefore, this : — He has been deprived of the
right of paying in silver ; a right which would now
be beneficial to him. And the value of gold, into
which the same law has transferred his debt, is
now in process of being tampered with to his serious
detriment.

Seeing that silver had, from time immemorial, been
the English standard of value, and that the gold stand-
ard was a mere excrescence upon it, the law of 18 16
would have been less arbitrary, if, instead of depriving
the debtor of the right of paying in silver, it had
deprived him of the right of paying in gold. But why
should he be deprived of either right ? The fact is
that the law was passed as a matter of convenience,
without any intention of doing injustice ; and it
seemed likely its practical working would be equi-
table. As this has now proved otherwise, it is both just
and expedient that immediate action should be taken
to provide a remedy for the weak point in that law.

BONDHOLDERS AND DEBTORS. 55

That it is expedient to take such action becomes
evident if we consider the position into which the
advocates of the sole gold standard, if not checked,
are about to carry us. The general demonetisation of
silver must be a slow process. It cannot be quickly
accomplished. But whether done slowly or quickly,
there is every prospect that when it has been accom-
plished the present difference in the relative value of
gold and silver will be immensely increased. When
silver has thus been reduced to a fraction of its relative
value to gold, is it likely that the national debtor will
be content to pay in gold coin, whose value will have
been enhanced by Government interference, a debt
contracted with the right of payment in comparatively
valueless silver coin ?

From a purely practical point of view it is indeed
rather in the interest of the bondholder than in that
of the debtor, for the Government immediately to
legislate for the purpose of sustaining the value of
silver. But, in fact, it is for the interest of both
parties and for that of the general peace and prosperity
of the country, that active measures should be
taken to prevent the creation of such conflicting
interests.

We have a gold circulation of 130 millions sterling.
Can it be doubted that we have thus in our hands
a power far more than sufficient to restore the
equilibrium which has been disturbed by the action of
Germany ?

56 THE STANDARD OF VALUE.

It is feared by many that there is a larger surplus
stock of silver ready to be thrown on the market than
our circulation could absorb without banishing all our
gold in exchange for it.

It appears to me that those who are of this opinion
overlook the fact that every pound of silver bought in
the market by the English mint would enhance the
value of silver, whilst the gold thrown on the market
in exchange for the silver would depreciate the value
of gold ; and this action would tend rapidly to restore
the former relative value of silver and gold. Its
powerful efficacy has, in fact, been proved not only by
the past history of the French mint, but also by the
recent action of the German mint ; for it is obvious
that the same adverse action brought to bear against
gold might at any time depreciate that metal just as
silver has been depreciated.

The extreme amount of England's direct influence
in the matter consists in the power to force 130 mil-
lion £ of gold from England, thereby reducing the
value of each unit in the stock of 700 million £
in circulation elsewhere 16 per cent, and also in
absorbing 150 million £ of silver, thereby en-
hancing the value of each unit in the stock of 720
million £ 27 per cent. This would amount to a
relative depreciation of 33 per cent, in the value of
gold, or sufficient to restore silver from a price of 40*/.
to the former par of 66d. per oz. I cannot see sufficient
reason for doubting that England's action would

* POSITION OF GERMANY. 57

restore the disturbed equilibrium, seeing that it is
obviously the interest of all silver currency countries
to aid that action, even though they may shrink from
the responsibilities of commercial treaties on the
subject.

Besides this interest of various nations in main-
taining the value of their existing stocks of silver,
France has also the same duty to perform as England
has ; for France has a large National Debt, and
it has also been borrowed under the double standard.

Germany can afford to be more independent in the
matter ; for an enhanced value of gold which would be
equivalent to an addition of more than a thousand
millions sterling to the debts of England and France
would add less than one hundred millions to the debt
of Germany. And therefore it can scarcely be doubted
that if the double standard were again legalised in
England, and discretion as regards the mint price of
gold and silver left with the mint authorities, the
English and French mints would immediately arrive
at an understanding regarding the course to be fol-
lowed for the common interest of the two countries-
The two countries hold not very much less than half
of the gold now in circulation,* and have therefore the
power, within very wide limits, to make the relative
value of gold and silver just what they choose to make
it, even if not assisted by the action of other nations.
It is, however, notorious that the United States and

* Published in 1880.

58 THE STANDARD OF VALUE.

many other nations would be prevented by their own
interests from active opposition to an attempt to re-
establish the former equilibrium ; and therefore any
active measures taken by them would rather be for the
purpose of assisting our action.

Even, however, if unaided by the active co-operation
of the French mint, and not completely successful,
England's sole action would at least make the depre-
ciation of silver so slow as to prevent any risk of its
forming a great national disaster, for it would put a
practical and immediate end to the propaganda in
favour of the universal adoption of the gold standard,
which caused the French mint to be reluctantly closed
against silver.

It cannot be doubted that if an issue of four shilling
silver coins equivalent to the French five franc piece
had been made as unlimited legal tender in England
in 1867, as suggested by Mr. Ernest Seyd, the present
depreciation of silver would have been prevented. And
this being so, then the suppression of the silver stand-
ard by the law of 18 16 is as much the cause of the
present depreciation as the recent German law which
has been the immediate cause. But, in fact, the
responsibility for the fall of silver, and relative rise of
gold,* rests chiefly upon the English law ; for not only
the German law, but also the whole of the propaganda

* The arguments in the paper on Lord Liverpool's Oversight show
that the depreciation of silver was then merely in relation to gold, and
not absolute ; which makes the argument in favour of a restoration of
the double standard as a matter of equity all the stronger. See p. 70.

THE RIGHT TO PA Y IN SIL VER. 59

against silver, is notoriously a consequence of the
example set by England in 1816.

The blow which has depreciated silver was really
struck by England in 18 16, and the act was not con-
summated under the plea of necessity, but was the
result of an opinion in favour of a sole gold standard
carried into effect in ignorance of the mischievous
effects it might entail. That law is the only one
which has tampered with the English standard of value
since the National Debt was first created. With all
its authority it cannot change the terms under which
the loan had previously been received, and therefore it
does not, in justice, annul the debtor's right to pay in
silver. I say it does not in justice annul the debtor's
right to pay in silver, because, whilst discussing the
question of reforming the law of 18 16, we must keep
in view the fact that the principal representatives of
the bondholders are bankers, merchants, and capitalists
who are supposed to understand the effects of such
laws; whereas the principal representatives of the
national debtors are labouring all day in the field, in
the factory, or in our coal and iron mines, and do not
pretend to understand the action of financial legisla-
tion. But if silver is allowed to become greatly de-
preciated below its present value in relation to gold,
then the simple question as to whether 171 8 grains of
silver are or are not as good legal tender as 1 13 grains
of gold for each pound sterling of capital or interest of
the National Debt, will be easily understood by all.

60 THE STANDARD OF VALUE.

•

The contingent disasters of such a predicament are as
obvious as the fact that they can be averted by the
readoption of the double standard annulled in 1816.

The course of events may be such as to make the
maintenance of the law of 1816 result in the rights of
the bondholders being challenged just as the legal
rights of the slave-owners in the United States were
formerly challenged on the plea of a higher law, and
ultimately vanished.

The Funding System has played an important
part in the history of the world since its first success
in assisting the cause of the great English revolution
in 1688.

It is an institution which has contributed to the
establishment of order and good government through-
out the civilised world.

Its utility, when resorted to in moderation and with
discretion, cannot be questioned.

It would, nevertheless, be hard to invent any
institution whose abuse could more insidiously, but
surely, ruin the prosperity not only of a nation, but
even of the civilised world.

Neither the old resource of raising money by
debasing the current coin, nor the more modern
method of making money by printing inconvertible
paper, allows scope for such mischievous consequences
as may be created by an abuse of the Funding System
in raising money by loans to be repaid by future
generations.

PROSPECTIVE DANGERS. 61

There is a limit in every country beyond which the
system cannot be resorted to without entailing certain
ruin.

It cannot be supposed that the English debt has
reached that limit. If, however, the value of the
interest on that debt should be enhanced 20, or per-
haps 80 per cent, by silver being thrown out of circu-
lation, and if any continuance of hard times should
prevail in the country, then the debtors may perhaps
look beyond the right of paying in silver, of which
they have been deprived by the law of 1816, and may
ask by what right any law or system of laws decrees
them to have been born with the obligation of allowing
the profits of their labour beyond a meagre subsistence
to be appropriated by others. Under the laws of
England which prevailed from before the Norman
Conquest to the year 18 16, not only the holders of
silver, but also all debtors, held rights which have been
ignored by the law passed in the latter year ; and if
that law continues to be sustained, then on no prin-
ciple of equity can a line be drawn to stop a gradual
progress from the repudiation of silver, which was then
inaugurated, to the repudiation of the National Debt,
by a law which will be the natural sequel to that of
1 8 16.

Even supposing the law of 18 16 to favour the
creditor to the extent not of 80 or 20 per cent., but
even 10 or 5 per cent, that alone is enough to con-
demn it

62 THE STANDARD OF VALUE.

Before the establishment of the Funding System
the standard of value was frequently debased to the
detriment of the creditor ; but the sharp eyes and
sharp wits of the bondholders have taken care to pre-
vent any more rascality with that tendency.

The debtors were not so ably represented in Parlia-
ment in 1816.

I have -already said that I do not believe that
Parliament then intentionally defrauded the debtors,
but that they were chiefly influenced by an opinion
in favour of the gold standard. But surely, when
acting on such a consideration, it must have been
forgotten that the law by which the double standard
had been legalised had been recommended by such
an authority as Sir Isaac Newton, and that its wis-
dom had been certified to by Napoleon Bonaparte,
who adopted a similar double standard in France in
1804.

Those authorities in favour of the Double Standard
ought to have sufficed to make even Lord Liverpool
refrain from tampering with the established standard
of value simply on the plea that, in his opinion,
the gold standard was preferable to the Double
Standard.

It was, doubtless, at that time, expedient for gold,
rather than silver, to be coined ; but, nevertheless, the
mint should have been allowed the right of purchasing
silver for coinage whenever it could do so at a fair
profit ; as, in fact, it could do at present.

BREACH OF FAITH. 63

Of course I do not advocate the idea of throwing
the mint open for the free coinage of silver whilst
the present depreciation exists. The mint, whilst
endeavouring to restore silver to its previous value in
relation to gold, should realise, for account of the
National Exchequer, the profit to be gained by
buying at the market rate and issuing at the legal
tender rate.

I do not advocate this course on the plea of the
Double Standard being better than either a gold or a
silver standard ; but on the plea of the standard of
value having been improperly tampered with in 1816,
and of its being expedient that that sole breach of
faith which has occurred between creditor and debtor
since the establishment of the National Debt, should
now be repaired.

The object to be attained is the prevention of the
demonetisation of silver.

Provided that the existing stock be kept in circula-
tion, and fresh supplies of silver be as freely received
at the mints as fresh supplies of gold, the precise
relative value of the two is a minor matter of detail
which does not affect the interest of either debtor or
creditor.*

* See foot-note p. 20. Under the double standard it is the whole
mass of gold and silver which forms the standard of value and not
merely the coined portions of the metals, and therefore a change of
ratio at the mints tends merely to cause a change in the relative
quantities of the two metals which would otherwise be offered for
coinage, without affecting the standard of value. But, though the

64 THE STANDARD OF VALUE.

The principle to be considered in this matter of
detail is the same as that which appears to have been
misunderstood in Parliament in 1816.

As there was then neither gold nor silver in circula-
tion, it was quite right to give a preference to the free
coinage of gold at the mint as a matter of conveni-
ence, and to leave the free coinage of silver in abey-
ance ; for as long as the relative 'value of the two
metals remained undisturbed, it was immaterial in
which metal accounts might be liquidated.

The mistake consisted in abolishing the silver
standard absolutely, evidently forgetting or ignoring
the fact that the debtor would continue to have > under
the terms of the National Debt, an absolute right to
pay in the silver pound sterling, if at any time the
preference given to the coinage of gold should artifi-
cially enhance the value of the gold pound sterling.

Just as the coinage of gold in preference to silver

change of ratio does not affect the standard of value it may affect the
standard unit. In order that the latter might not be affected by a
change of ratio, one half of the change should be effected by increasing
the weight of the coins of one metal, and the other half by decreasing
the weight of the coins of the other metal.

In practice, however, all changes of ratio have been effected by
changing the coins of only one of the metals, thus making each time a
slight change in the value of the standard unit, and any future changes
will also probably be effected in the same manner, because it leaves
one set of coins which are indisputably legal tender on all current
contracts, and its greater simplicity more than compensates for the
slight change of the value of the standard unit, which might be
avoided by changing the weight of both sets of coins. — Note to this
Edition,

RA TIO OF GOLD AND SIL VER. 65

might have been resorted to in 18 16 as a matter of
convenience without prejudice to the rights of debtor
or creditor, so also, provided gold and silver both be
acknowledged as unlimited legal tender, and whilst
working for the restoration of the former equilibrium,
it is immaterial as regards the respective interests of
debtor and creditor whether the rate of issue be the
former English rate of 17 18 grains for a pound
sterling, which is equal to the ratio of 1 5 • 209 to 1 ; or
the French rate of 15^ to 1 ; or the issue recom-
mended by Mr. Seyd of 4s. coins containing 350$
grains of pure silver, and therefore equal to 2\ rupees.

If we were acting without expecting the speedy
co-operation of other nations in the attempt to restore
and sustain the value of silver, then the latter coin
would not only have the merit of being a convenient
coin for legal tender both in England and in India,
but, as it gives silver and gold the ratio of 15*515 to
1, the mint might issue at that rate under circum-
stances which would not conveniently allow of its
issuing either at the French rate of 1 5 \ to 1 or at the
former English rate of 15 '209 to 1.

As the latter rate, with the French bimetallic law
in force, gives silver in relation to gold a value of
nearly 2 per cent, more than the French rate, its
action would tend to force silver to the English mint
and gold to the French mint ; and therefore it could
not be permanently readopted without inconvenience.

The adoption of the French ratio would not only

F

66 THE STANDARD OF VALUE.

obviate this inconvenience, but would also have the
merit of facilitating the action of France and other
countries in joining the course initiated by us for
maintaining the circulation of silver ; and this latter
consideration makes a coin of the French ratio (say a
4s. coin containing 350*305 grains of pure silver) as
many years ago suggested by Mr. Seyd, more desir-
able than his later suggestion of the heavier coin of
35°f grains.* The great object to be attained, as
already said, is to keep both gold and silver freely in

* " Let our Government agree, then, that for the British dominions
113*0016 grains of pure gold (123*27447 standard) or 1751*5247
grains of pure silver (1893*5403 standard) shall be indifferently a good
discharge for a debt of one pound sterling, and that they will coin all
silver that any one brings to the mint into pieces of 350*3049 grains
pure, the debtor to have always the option of paying his debt either in
gold or silver. For other countries the weight and denomination and
currency of silver and gold coins would be specified in a corresponding
manner. This is the whole Bill." — The Double Standard. By Henry
H. Gibbs, with an Introduction by Henry R. Grenfell. London, 1881,

P-45-

Though I do not attach much importance to the question as to

whether the silver coin for unlimited legal tender is to be a four-
shilling or a five* shilling coin (that is to say, a silver crown, con-
taining 437*8812 grains of pure silver), it is nevertheless satisfactory
to notice that Mr. Gibbs has pronounced in favour of the same coin
recommended in the text above. I am, however, most emphatically at
variance with Mr. Gibbs as regards what he considers to be " the whole
Bill" required for an international treaty on the subject. For
Mr. Gibbs' proposal evidently implies coinage free of charge, as was
erroneously supposed by Lord Liverpool to be essential for the main-
tenance of a true standard of value. Not only have I shown that Lord
Liverpool was mistaken on the latter point, but I have also suggested
that it would be most undesirable for the English mint to be bound by
treaty with foreign governments to coin indiscriminately, free of
charge, all gold or silver offered for the purpose. — Note to this Edition.

THE RIGHT TO PA Y IN SILVER. 67

circulation, remembering that the debtor has as much
right to protest against the mint being closed against
silver as the creditor would have to its being thrown
open for the free coinage of copper as unlimited legal
tender. And therefore, if the attempt to sustain the
value of silver should fail, and it should, in conse-
quence of the mints having been closed against it, fall
to a small fraction of its present value, the national
debtor has, in equity, just as much right to pay 1718
grains of silver for a pound sterling as the creditor has
to demand 113 grains of gold, whilst by the terms on
which the loan was raised, the debtor has the right of
paying in the silver, and the creditor has not the right
to demand gold. The bondholder who encourages
the demonetisation of silver in the hope of improving
his income takes, therefore, I think, a shortsighted view
of the matter.

The assertion that, under the circumstances just
mentioned, the debtor has, in equity, as much right
to pay in silver as the creditor has to demand gold,
rests on the fact that the relative depreciation of
silver is caused not merely by a decrease in the value
of silver, but also by a simultaneous increase in the
value of gold.

The proportion which the rise in the value of gold
may bear to the fall in the value of silver must depend
on circumstances.

With half the metallic circulation gold and the
other half silver, then the withdrawal of one half of

F 2

68 THE STANDARD OF VALUE.

that specie would necessitate the withdrawal of one
half of the paper circulation based on it. And then
the rise of gold would be as great as the fall of silver,
or gold might even be doubled in value with a relative
depreciation of 70 or 80 per cent, in the value of
silver ; unless the difficulty of withdrawing the paper
should practically result in a great part remaining as
inconvertible currency.

For this and some minor reasons I have alluded to
the demonetisation of silver not as doubling the
burden of the National Debt, but as equivalent to an
increase of 25 per cent.

An absolute rise of 25 per cent, in the value of gold
with a fall of 25 per cent, in the value of silver would
be a so-called depreciation of 40 per cent, in the value
of silver, or a market price of 36*/. per oz.

It is, however, practically possible that gold might
rise 80 per cent, and that the utility of silver for other
purposes than coin might keep it from falling more
than 70 per cent., which would be a relative deprecia-
tion of 83^ per cent, or a market price of \od. per oz.,
which may perhaps be the extreme price to which it
is practically possible for silver to fall. If, however,
we admit the practical impossibility of more than
partially changing the circulation of India and China
from silver to gold, and the certainty that a consider-
able amount of inconvertible paper must remain in
circulation in some countries on silver being thrown
out, we may perhaps safely consider 20d as a practical

CA USE FOR AN INCREASING VALUE OF GOLD. 69

limit to the fall in silver which the attempt to establish
gold monometallism might cause. That price would
result from a fall of 50 per cent, in the value of silver,
coupled with a rise of 50 per cent, in the value qf gold.

It must, however, be borne in mind that, though
the relapse of some nations to inconvertible paper
might partially check the immediate rise of the value
of gold, their attempt to return to specie payments
would tend to cause a slower rise.

So that in theory there is no limit to the rise in the
value of gold which a demand for metallic circulation
might cause, and we have therefore before us the
abstract possibility of gold being trebled in value, or
a rise of 200 per cent, which, with the fall of 70 per
cent, in the value of silver, would give a relative de-
preciation of 90 per cent, or a market price of 6d. per
oz., which could, however, be brought about only by a
very slow process*

Whether the demonetisation of silver doubles the
value of gold or merely adds 1 5 per cent, to it : that

* " We have all seen what has been the consequence of the de-
monetisation of silver by Germany, and the consequent absorption of
gold by that nation, and that prices, as measured in gold, have fallen
considerably wherever other circumstances have not concurred to
maintain them. What will be the case if France and the Latin Union
and the United States should . be driven to do the same ? The con-
sequent and sudden fall in prices will be not four-fold but forty-fold,
and the peril to our commerce will be incalculable. The only real and
permanent remedy would then be our adhesion to the principle of the
double standard as set forth in these pages. 11 — The Double Standard,
By Henry H. Gibbs, with an Introduction by Henry R. Grenfell.
Effingham Wilson, London, 1881. — Note to this Edition.

70 THE STANDARD OF VALUE.

is to say, whether it is equivalent to an addition of
750,000,000/. to the National Debt, or merely an
addition of 112,500,000/., it is not just that such an
additional burden should be imposed on the debtor
by the vagaries of artificial legislation, or on the plea
of a gold, being more convenient than a silver circula-
tion. If, therefore, the influence of the bondholder
should be exerted for the demonetisation of silver, the
debtor will, with equity, stand on the original terms
of the bond, and insist on 171 8 grains of silver being
accepted as legal tender for a pound sterling.

What is at present termed the depreciation of silver
is probably due in a greater degree to an absolute rise
in the value of gold than to an absolute fall in that of
silver.* For the action of Germany in withdrawing
100,000,000/ from a stock of about 800,000,000/ gold
tends to give an increased value of 14 per cent, to
each remaining unit. Whereas the 60,000,000 sterling
of silver thrown on a stock of about 640,000,000 tends
to depreciate each unit 9 per cent, making a relative
depreciation of 20 per cent., or a market price of 48*/.
per oz.

How much of the fall beyond 48*/. was due to a
rise of gold, or to a fall of silver, it is more difficult to
estimate.

Probably a part of the fall was similar to the fall
which occurs in the value of bank notes in face of a

* This opinion has been corroborated by the arguments alluded to
in the footnote on page 58. — Note to Second Edition.

FUNDAMENTAL PROPOSITION 71

prospect of repudiation on the part of the Bank of
Issue.

For every grain of gold or silver, whether in coin,
in bullion, in articles of use, or as yet undisturbed in
the mine, has virtually become a promise to pay on
demand. They do not, like paper, require words
stamped on them to be distinguished by the Bank.

The civilised world is the Banker by whom those
promises are issued, and property of all other de-
scriptions is the value in which they are payable on
demand.

The prospect of demonetisation, or, in other words,
the propaganda made to induce the banker to refuse
to " cash " the silver promises at par, would naturally
cause a depreciation which would be recovered as
confidence in the intention of the banker to cash the
silver, as well as the gold promises, became restored.

The propaganda openly advocate repudiation merely
as a matter of convenience, apparently forgetting its
inconvenience to the holder of the promises.

We know too well what distress and ruin are
wrought by the failure of a comparatively small
country bank to cash its notes.

We may perhaps be able to imagine the distress
and poverty which would result from the repudiation
of the Bank of England promises to pay.

But what is that compared to the world-wide in-
fluence of the repudiation of silver? In justice to
mankind let it be recorded that no such gigantic,

72 THE STANDARD OF VALUE.

bold, and mischievous injustice has ever before been
attempted in* the history of the world ; and also, that
the rising value of silver now shows a return of con-
fidence in the Banker's honour.

Returning to the more practical line of argument :
it is, as already stated, an open question whether
under existing circumstances the attempt by England
to return to bimetallism would practically give us a
double standard or a silver standard. But it seems
most probable that even an attempt to effect a change
of our current coin from gold to silver by the mint
purchasing silver at its market rate and issuing it at
the rate of 15^ of silver to 1 of gold, would simply
result in the practical working of the double standard ;
for the mint would, of course, cease its purchases of
silver as soon as they ceased to be profitable,, and it is
not by any means apparent that there is a sufficient
supply of silver for the demand which the attempt to
change our circulation from gold to silver, without
cost, would create. For, as France and the United
States are both interested in maintaining silver in
circulation, they would naturally at least refrain from
opposing our action. Be this, however, as it may,
seeing that justice requires the readmission of silver
into the circulation, that consideration should over-
ride all nice distinctions of opinion regarding the
comparative merits of the Silver, the Gold, or the
Double Standard.

Our former rate of 171 8 grains of silver for 113

-»^ m • w*

THE SILVER POUND STERLING, 73

grains of gold, allows a permanent premium on the
importation of silver in exchange for gold, from
countries under the French bimetallic law. The pre-
cise rate at which silver is readmitted is, however, a
mere matter of convenience, as it does not affect the
respective interests of debtor and creditor, provided it
is such as to sustain the practical working of bimetal-
lism. And, therefore, the adoption of the French
ratio would be a just arrangement in the interests of
the bondholder, without giving the debtor any equi-
table cause for complaint The fact to which we must
not shut our eyes is that, in case the attempt to re-
establish the equilibrium between gold and silver
should fail, and silver should consequently become
permanently depreciated, then no legislation can
change the fact that 171 8 grains of silver is a true
legal tender for the pound sterling under the terms
on which the National Debt was received. It is the
pound sterling in which the debtor has that right to
liquidate the debt ; whilst, as a question of equity, it
would be as unfair for the debtor to be forced to pay
1 1 3 grains of gold, as for the creditor to be forced to
receive 1718 grains of silver, though the terms of the
debt make this legally valid.

It is in order to prevent the growth of these con-
flicting interests that England should immediately
take practical measures to restore the value of silver.
If those measures should fail, then 171 8 grains of
silver will practically become the British pound ster-

74 THE STANDARD OF VALUE.

ling, whose value in relation to foreign circulations
will readjust itself.

If, at any subsequent period, the vagaries of foreign
legislation should so raise the value of silver and de-
preciate that of gold, as to make 171 8 grains of silver
worth more than 113 grains of gold, then, if the differ-
ence became sufficient to leave more profit to the
mint on coining gold than on coining silver, it would
again put gold in circulation.

In the absence of a bimetallic law established by
international treaty, the foregoing is the system into
which all nations will,* I believe, gradually be forced
by self-interest ; and by it the principle of bimetallism
would be practically maintained, subject to variations
of perhaps 3 or 4 per cent.

Whilst alluding to this system of the independent
action of each nation, it will not be out of place for me
to mention that in the year 1874, when I expected to
have the requisite support for the purpose in London,
I drew up a system for the introduction of a metallic
circulation into this country, and framed it on that
principle ; considering it one that could be sustained
here, even though the maintenance of a sole gold
standard might become impracticable.*

The present objection to acting on that principle in

* Specie payments were suspended in Buenos Ayres in 1876. If
the specie circulation had then been silver instead of gold, the pressure
which caused the suspension would, to say the least, have been very
much less, and probably would not have been felt at all. — Note to
Second Edition.

THE COINAGE OF SILVER. 7$

England is, that it compels us to run the risk of a
complete change from a gold to a silver circulation.
I do not myself believe that, if managed with discre-
tion, it would have such a result. And, in favour of
that course is the expediency of avoiding the creation
of the conflicting interests between debtor and
creditor, to which I have alluded ; and also the duty
of abstaining from such a wholesale change of the
standard of value under which the National Debt was
received, as must result from the demonetisation of
silver.

For these reasons it seems to me that justice com-
mands the practical course which it is now England's
duty to take. The mint cannot, without National
dishonour, remain closed against either gold or silver ;
but a fair charge might with propriety be made to
cover the cost of coining gold, and the mint price for
silver might be made to follow the market value
in such a manner as to keep a constant supply
offering as long as the mint can make a profit by
coining.

Neither France, with all her monetary power, nor
any other country, could take the course I have sug-
gested for England, with the same prospect of success
as would attend England's action. For France would
have to act, not only knowing beforehand that the
English law of 18 16 makes it impossible for the
English mint to assist that action, but also, in face of
the risk of a further extension of the principle of gold

76 THE STANDARD OF VALUE.

monometallism already adopted by England and
Germany.

But the first effect of the restoration of the Double
Standard in England would be an immediate scramble
between the English, French, and other mints for the
profit to be made by the first purchases of silver for
coinage ; for all danger of an extension of gold mono-
metallism would then be removed.

By the time the English or other mints had between
them picked up as much money as Germany has
spent in the process of changing from a silver to a
gold coinage, the old equilibrium would be re-esta-
blished. For, as regards this special point, the effect
of legislation may be regarded as that of a game at
cards, by which no wealth is created though money
changes hands.

Germany has thrown a pile of money on the table,
and it remains to be seen whether England will take
it up by playing the Silver Standard ; or whether,
by the maintenance of the gold standard, Germany
may get the best — or, I should rather say, come least
badly off in the game of " beggar my neighbour,"
which has been inaugurated by the attempt to extend
the gold standard.

Even, however, supposing that we were not guided
by self-interest, as I contend, to the course here sug-
gested, nevertheless the main conclusion arrived at by
*he foregoing arguments is that, though circumstances
may give us practically a single standard under a

DUTY AND EXPEDIENCY. . 77

double standard law, we have no right to a single
standard established by law whilst the National Debt
remains unpaid. And justice, therefore, calls on the
nation to choose between two courses — either pay off
the National Debt by an assessment on capital, as
urged by Ricardo ; or return to the Double Standard,
as arranged by Newton.

Mr. Chairman and Gentlemen, — I have, as you have
perceived, urged you to adopt the second resolution
chiefly as a measure required by justice and duty ;
secondly, as a measure of political expediency ; and
thirdly, as a financial measure, whose advantages
outweigh its disadvantages. Be the merits of this
third plea, however, what they may, let us re-
member

"It oft is told in England's story,
The path of duty is the road to glory."

And even if the full concession of the right to pay
in silver should result in a complete change from a
gold to a silver circulation, the change may simply
teach us more fully that our wealth and prosperity are
due to ourselves and not to the metal it may chance to
suit us to use for coin.

78 THE STANDARD OF VALUE.

NOTE TO THIRD EDITION.

THE following extract from a leading journal, and
more especially the part I have italicised, is worthy
of careful consideration in connection with the history
of the pound sterling : —

" Any one who has studied the administration of
England during the great French war and the period
which was its sequel will pause before condemning
the influence of Cobbett, if not the man himself, too
uncompromisingly. It was a period of pretences ; and
subterfuges, and hypocrisies. The rulers ruling under
one title exercised powers that title was never meant
to cover. The ' Political Register ' had its birth in a
period when they who were supposed to represent the
British people represented either Downing Street, or a
score of borough-mongering peers, or a heavy balance at
their bank, Wages were a species of poor rate, and
the poor rate a form of wages. The criminal law was
a lottery, in which the least guilty might draw the
penalty of the most atrocious outrage. Finance was
reduced to mere jugglery ; and, lastly, Lord Castlereagh
was transplanting the principles of foreign despotism
into English soil." — Edinburgh Review, April, 1879,
pp. 497-8.

THE POUND STERLING:

ITS

HISTORY AND CHARACTER.

(Published in Buenos Ayres in 1881.)

Quis talia fando temperet ?

\

THE POUND STERLING

ITS

HISTORY AND CHARACTER.

I.

The Nineteenth Century Review for June, after pro-
pounding the question : " What is a Pound ? " seems
inclined to answer, as I did before the Literary Society
last year, to the effect that it is either 171 8 grains of
silver or 113 grains of gold, at the option of the
debtor; and, though I am at present exiled from
England by the hostility of the professional philo-
sophers, who cannot forgive a merchant's clerk for
having become the discoverer of the action of astral
gravitation, and for having, by means of that dis-
covery, corrected the fundamental error which per-
vades what they have for two centuries been teaching
as the " Laws of Motion," I will not on that account
refrain from continuing to take part in the discussion
of this, the most important question which thoughtful

G

82 THE STANDARD OF VALUE.

men are now endeavouring to make politicians
understand*

I approach the subject in a tone of " moderation "
not because I think that those who clearly understand
its importance ought at this time to be moderate in
the expression of their opinion, but because I cannot
readily command for the discussion of what are now
to me stale truisms, the " zeal and enthusiasm " with
which nearly a quarter of a century ago I denounced
the injustice of the standard of value which was esta-
blished in 1816, and denied the right of Parliament,
under then existing circumstances, to alter the
" ancient standard of the realm."

IL

The sovereign, which is at present the only legal
representative of the pound sterling, is a quite modern
coin ; and it does not, as regards weight, or value, or
metal, or in any respect represent the original pound.

* At the Bimetallist Meeting held at the Mansion House this year
(1882) the Lord Mayor on opening the proceedings expressed an
opinion similar to that I have expressed above ; declaring this to be
the most important question of the age. On the other hand, The
Times, in a leading article on the 16th Nov., 1881, soon after receiving
the above, in the First Edition, declared, not that the Currency
Question but that the Land Question is " the most important subject
which can now engage the attention of the men of politics or the men
of science;" and ignored the possibility of the difficulties between
landlord and tenant being in any manner connected with the Currency
Question. The writer of that article perhaps does not know that any
change of the standard of value occurred in 1873. — Note to Second
Edition,

EARL Y HIS TOR Y. 83

The pound sterling, divided into 240 pence, is the
oldest measure of value known to have been in use in
England ; and it originally consisted of a Troy pound
weight, or 5760 grains,* of standard silver. The
silver penny then weighed 24 grains and served as a
measure of the penny weight

When the Saxons established themselves in Eng-
land, they introduced the use of the Saxon pound,
which weighed only 5400 grains ; and this, which
became known as the Tower pound, continued to be
used at the mint in the Tower of London until the
reign of Henry VI II., when the use of the Troy
pound was resumed.

As the penny continued to be the 240th part of the
pound, the Saxon pennies weighed only 22^ grains
each, and therefore ceased to represent the full penny
weight; but the pound sterling continued to be re-
presented by the quantity of standard silver equal to
the pound weight in ordinary use.

Throughout the reigns of the Saxon kings and up
to the beginning of the fourteenth century the pound
sterling, both in England and in Scotland, preserved

* The Troy weight (says Mr. Davies Gilbert, late President of the
Royal Society), appeared to us (the Commissioners of Weights and
Measures) to be the ancient weight of this kingdom, having, as we
have reason to suppose, existed in the same state from the time of
St. Edward the Confessor ; and there are reasons, moreover, to believe
that the word Troy has no reference to any town in France, but rather
to the monkish name given to London, of Troy Novant, founded
on the legend of Brute. Troy weight, therefore, according to this
etymology is, in fact, London weight — J. R. M'Culloch.

G 2

84 THE STANDARD OF VALUE.

its original character as representing a pound weight
of standard silver, though there appears to have been
some confusion between the use of the Troy pound
and the Saxon pound. It is supposed by some that
both these were in use at the same time both as
measures of value and as measures of weight.

III.

Edward I. first tampered with the standard of
value in England. In the year 1 300 he appropriated
3d. from each pound ; and by paying out light coins,
made the pound sterling cease to represent a pound
weight.

Soon after this Robert Bruce took is. from each
pound sterling in Scotland. And the example of
these kings was followed by some of their successors,
more especially by Henry VIII. in England and
James VI. in Scotland, to such an extent that at the
beginning of the seventeenth century a pound weight
of silver was coined into thirty-six pounds sterling in
Scotland and into three pounds in England.

Henry VIII. had not only issued light coins, but he
also debased the quality of the silver.

Queen Elizabeth, however, soon afterwards restored
the English standard to its original purity ; but to
compensate or partially compensate for this restora-
tion of quality, issued 3/. 2s. instead of 3/. for a pound
weight.

ORIGIN OF THE FUNDING SYSTEM. 85

Thus, when James VI. of Scotland succeeded to
the throne of England, the quality of the standard
silver was the same as it has been from before either
the Norman or the Saxon Conquest to the present
day, excepting the seventeen years during which
Henry VIII.'s spurious coins were legal tender; and
the pound sterling consisted of 1858 grains of that
standard silver.

This English standard was then extended to Scot-
land, displacing the Scotch sterling, which had become
not only much lighter in weight, but also greatly
debased in quality.

Soon after this the Funding System was esta-
blished, and this method of raising money put an end
to further depreciations ; for it was evident that
money would not be lent to the Government to be
repaid in depreciated coin.

IV.

The first amount of debt was incurred by William
III., who borrowed 16,000,000/. sterling at interest and
defeated James II., who issued copper instead of silver
coins for the payment of his troops. The triumph of
William put an end to the system of raising money
by the issue of depreciated coin, and inaugurated the
Funding System in its place.

Whilst the above-mentioned loan was raised by
William, and a further amount of 36,000,000/. sterling

86 THE STANDARD OF VALUE.

by Queen Anne, a considerable amount of gold was
in circulation in England, though only silver was
current at its legal tender value. The creditor had
the option of refusing the gold guinea at its current
valuations of 30*. to 21s. 6d.\ its legal tender value
being 20s. But in 1717 the practical position of gold
became legalised. The gold guinea, which was legal
tender for 20s., and which the law did not then allow
the creditor to receive for more than 22j., was in
circulation at a conventional value of 21s. 6d. In
December 17 17 the value of this coin was restricted
by law to 21s. ; and in May 171 8 it was made legal
tender for that same value. In this manner the legal
tender value and the current value of the guinea both
became established at 21s. The immediate object of
this measure was to prevent the exportation of silver
coin which was then going on. It was hoped that
the legal value of 21s. given to the guinea would
prevent creditors from receiving it at its conventional
value of 2 1 j. 6d. 9 and would thus cause the gold, in-
stead of the silver coin, to be exported. As regards
this purpose, the measure was only partially successful,
but it achieved the more important object of legalising
the position of gold as part of the currency of the
kingdom. The gold and silver, or Double Standard,
had prevailed in practice from the reign of Henry III.,
when gold was first coined in England, though gold
was not always legal tender, and when declared legal
tender was not always current at its legal tender value

THE DOUBLE STANDARD LEGALISED. 87

until 1 71 8; but from that date both gold and silver
became current at their legal tender values, thus
definitely establishing the Double Standard both by
law and in fact and keeping the relative value of the
metals in the market under the control of this double
standard valuation.*

V.

Under the standard of value legalised as above
mentioned, the amount of the debt continued to
increase with each successive war in which we were
engaged ; until at the commencement of the American
war of Independence it amounted to 1 28,000,000/,
sterling.

That unfortunate nine years' war added 121,000,000/.
sterling to the debt ; and nine years after the con-
clusion of that disastrous war, we commenced the
great war with France, which was merely a sequel of
the American war, which had originated in the narrow-
mindedness and incompetence of our own Government,

* The Doable Standard thus established governed the market value
6f the metals until 1874, being in the mean time subjected to the
change from the English to the French ratio. In 1874 the standard
whose position was acknowledged and facilitated by Newton and
Bonaparte, became deranged by the arbitrary action of Lord Liverpool
and the Paris Conference of 1866.

I have modified this paragraph, of Section iv., for this edition : but
these modifications of historical detail are such as do not affect the
argument of the essay ; unless indeed they make it stronger than
before. For authority on the above points see footnotes on pages 50
and 51. — Note to Second Edition*

88 THE STANDARD OF VALUE.

and which in the course of twenty-two years added,
horresco referens> a further amount of 600,000,000/.
sterling to the debt.

VI.

Thus in 1816 the debt amounted to 850,000,000/.
sterling, each of which was by the terms on which it
was borrowed, either 17 18 grains of silver or 113
grains of gold at the option of the debtor ; * but
Parliament then decreed that the debt which had
been borrowed with the right of payment in silver,
must be paid in gold: for they closed the mint
against silver, except for the coinage of a limited
amount issued at an enhanced value for small change,
and declared gold the only legal tender for the pound
sterling ; the mint being open for the unlimited coin-
age of the gold sovereign^

* Whilst the first 52,000,000/. of debt was incurred it did not suit
the debtor to pay in gold, except at a conventional valuation higher
than the above relative value. But from the very commencement of
the Funding System, until the year 181 6, he always had the legal right
of paying either in silver or in gold at his option, though the legal
ratio varied somewhat from the above before 171 7 and differed from the
ratio in usage. — Note to the Second Edition,

f The name of sovereign was first given to a 2ar. gold coin in the
reign of Henry VII. New sovereigns were coined by Henry VIII. ;
and again by Queen Elizabeth. The 20s. gold coin was subsequently
called a laurel, and afterwards, in the reign of Charles II., a guinea,
which latter, though legal tender for 20s., was current at rates varying
from 30J. to 2 ix. 6d. y until, in 17 17, its value became fixed both by law
and usage at 2ix., as above mentioned, and remained so until 1816 ;
after which it was, together with the silver coinage, supplanted by the

THE LAW OF 1816. 89

VII.

Now if Parliament had a right to pass such laws as
above mentioned, then it has just as much right to
open the mint for the free coinage of copper and to
declare 240 copper pennies to be legal tender for the
pound sterling.

As the money was borrowed with the right of
paying in either silver or gold, it was just as im-
proper to deprive the debtor of the right to pay in
silver as it would have been to grant him the right to
pay in copper as well as in silver or gold.

It certainly was quite right that further debasement
of the currency should be prevented after the esta-
blishment of the Funding System ; but, if it be unjust
to make a change in the value of the pound sterling
in favour of the debtor, then it is also equally unjust
to make a change in favour of the creditor.

The historical summary I have just given shows
that before the Funding System was commenced, the
currency was frequently tampered with by successive
governments, who issued depreciated coin as a means
of raising money. The interests of the bondholders
had, however, the beneficial influence of preventmg
any further debasement of the coin ; so that from the

gold sovereign issued by George III., in accordance with the suggestion
of Lord Liverpool which has become ihtfons et origo malorum. — Note
to Second Edition,

90 THE STANDARD OF VALUE.

beginning of the Funding System up to the year 1816
no change was made in the standard of value. Then,
however, we find Parliament passing a measure with
a tendency not to depreciate, but to enhance the
value of the pound sterling.

I have, in the essay published last year, explained
that I do not for a moment suppose that the majority
in Parliament passed that measure with the wilful
intention of defrauding the debtors. Let us, however,
suppose that, instead of a measure having been
brought before Parliament proposing to close the mint
against silver, and to make gold the only legal tender,
a proposition had been made to open the mint for the
free coinage of copper and to make 240 copper pennies,
as well as 4 silver crowns or one gold sovereign, legal
tender for the pound sterling. Setting aside all ques-
tions of convenience, would not the bondholders
immediately have perceived that such a measure
would be a gross injustice to them ? And would they
not boldly have denied the right of King, Lords, and
Commons. to perpetrate so barefaced a swindle ? And
yet, what distinction is there, when viewed as a mere
matter of justice, between an act which deprives the
debtor of the right of paying in silver, to which right
he was entitled by his agreement with the creditor,
and an act which entitles him to pay in copper, in
which he was not entitled to pay by his agreement ?
The only distinction is that the suggested right to pay
in copper would be an injustice to the creditor;

MEASURE FOR MEASURE. 91

whereas the withdrawal of the right to pay in silver is
an injustice to the debtor.

No such Act as the suggested right to pay in copper,
nor any Act tending to depreciate the pound sterling,
has had any chance of being passed in Parliament
since the establishment of the Funding System, simply
because the chief representatives of the bondholders
are bankers, merchants, and capitalists who have
sufficient knowledge and influence to protect their just
interests ; whereas the chief representatives of the
debtors are labouring in the fields, in the factories, or
in the mines, and as the Government of the day either
had not the patriotism or power to defend their just
interests, or else did not properly understand the
influence of the measures which deprived them of the
right to pay in silver, the debtors have been defrauded
by Act of Parliament.

The compact between debtor and creditor has been
broken in favour of the latter by a Parliament in which
the influence of the bondholders was in the ascen-
dant ; and, if this act of injustice be not quickly
repaired, how will the bondholders be able equitably
to complain if ever a Parliament in which the influence
of the debtors may be in the ascendant should order
them to accept their pounds sterling in copper or in
paper ?

92 THE STANDARD OF VALUE.

VIII.

Let us take a purely practical view of the conse-
quences of the law passed in 1816.

Up to the year 1873 the silver continued to be worth
as much as the gold pound sterling ; with the former
the debtor could purchase the latter at par to pay the
creditor, and, therefore, the obligation to pay in gold
was no practical loss to him. In that year, however,
the German Government, having decided to change
their silver for gold coins, became large purchasers of
gold. Now, if the English debtor had not been de-
prived of the right to pay in silver, then, as the English
market sold gold in consideration of the premium
which Germany chose to pay for it, the silver with
which Germany bought the gold would have supplied
the place of the latter without any fall in its absolute
value. Debtors and creditors in England would not
have been affected, but the holders of gold would
merely have gained the premium which the German
Government was pleased to pay for it Instead of this
being the case, the law of 18 16 had made it a necessity
for the English debtors to have gold with which to pay
their debts ; and, therefore, this double demand for
gold enhanced its value and made silver a compara-
tively useless metal.

To illustrate the principle involved in this question
we may roughly estimate that the action of Germany

ACTION OF THE LAW OF 1816. 93

in withdrawing icx>,ooo,ooo/. sterling from a stock of
800,000,000/. sterling enhanced the value of each
remaining unit 14 per cent, making the English
National Debt of 750,000,000/. sterling equal in value
to what a debt of 855,000,000/. sterling would other-
wise be ; whereas, if the English mint had been open
for the coinage of silver, as the conditions under which
the National Debt was received require that it should
be, then silver would have supplied the place of any
gold withdrawn from England for recoinage in Ger-
many, and the relative interests of the English bond-
holder and national debtor would not have been
affected by the German demand for gold. It is simply
because the English law of 1816 has deprived the
debtor of the right to pay in silver that the action of
the German Parliament has had the effect of increasing
the burden of the English debt. Roughly speaking,
an extra burden of 100,000,000/. sterling has been
placed on the shoulders of the British tax-payer, just
because Lord Liverpool and his colleagues in 1816
fancied a gold to be better than a double standard,
and had not sufficiently clear financial knowledge to
enable them to understand the injustice they were
committing when depriving the debtor of the right to
pay in silver.

Courtesy requires us to assume that the lords and
gentlemen who voted with the majority in 18 16 had
not sufficient financial knowledge to enable them to
understand the character of the laws they passed, for

94 THE STANDARD OF VALUE.

I cannot for a moment suppose that they delibe-
rately intended, in an insidious and underhand manner,
to increase the value of the bondholders' property
to the detriment of the already heavily-burdened tax-
payer.

IX.

Not only does the simplest principle of justice
require that the English mint should be opened for
the coinage of silver, seeing that under the conditions
on which the National Debt was received silver is as
true a legal tender as gold for the pound sterling, but
also the welfare of the British Empire urgently requires
that act of justice and equity. For the crotchet in
favour of gold, by which we charitably assume that
British statesmen were actuated in 1816, has not only
spread to Germany, but other countries also, with cir-
culations of inconvertible paper and attempting to
return to metallic money, are possessed by that same
fancy ; and it would be quite possible for the growth
of such a crotchet, spreading like a contagious and
dangerous disease, in the course of a few years, to
double the value of gold. The British tax-payer is,
therefore, to this extent, at the mercy of foreign legis-
lation, which, by resolving to have gold rather than
silver for circulating medium, may double the burden
of the English National Debt as truly as if under the
real terms of the debt a new loan of 750,000,000/. ster-
ling were raised by the British Parliament. And the

THE ARMY AND NA VY. 95

bondholder would get this increased value of stock, not
for value given or lent to the nation, but as a gratuitous
bonus on his bonds.

Apart from the simple question of justice, is it de-
sirable that the relative interests of the British bond-
holder and tax-payer should be in this manner
dependent on foreign legislation ? And is it pos-
sible for the country to stand the increase of
taxation which, under our present unjust standard
of value, might be laid on it by such foreign legis-
lation ?

Our present national income is not quite easily
raised. The national expenditure is jealously watched,
and in the estimates for the army and navy every item
is trimmed down to a minimum. It is evident that
even now the requirements to meet the interest on the
National Debt are damaging the efficiency of the
army and navy ; and how then is the position of the
empire among nations to be sustained if those services
are allowed to be still further crippled by wholesale
and gratuitous augmentations of the burden of the
debt?

The dread of expenditure has not only been one of
the chief causes of the rebuffs and reverses sustained
in Asia and Africa, but has also been the sole cause of
the prestige, tarnished by mismanagement, not having
been re-established by conduct worthy of the England
of our fathers. A leading London paper alludes as
follows to one of our recent disasters : —

g6 THE STANDARD OF VALUE.

" It is painful to hear too late of the numerous
mistakes which were made by the Colonial Office and
its Agents. It is probable that, with greater tact and
foresight, the Boers, who had almost unanimously
accepted the transfer of allegiance, might have been

permanently reconciled to English sovereignty

The final and decisive error consisted in the with-
drawal of troops, and, especially, of cavalry, at the
time when the Boer leaders were openly threatening
revolt. The English Government had, after the Zulu
war, been seized with a morbid fear of military ex-
pense in South Africa, and the Transvaal was almost
entirely evacuated without regard to the dangers, or
even to the cost, of a sudden reverse of policy. Only
troops enough were left to provide the Boers with the
opportunity of surprising a small detachment, and of
besieging isolated forts of which the garrisons might
be regarded as hostages."

Is it not evident that the " morbid fear of expense "
alluded to in the foregoing extract is a consequence
of the heavy amount already due to the bondholders ?
And yet, in the midst of this disastrous state of affairs,
the latter have, in the course of the last seven years,
received from the public purse the equivalent of at
least 20,000,000/. sterling more than they are entitled
to receive. Or, if we take the market price of the
silver pound, then the excess received by the bond-
holders is much greater, for, in some of the interest
paid to them, they have received 6s. in every pound

PROSPECTIVE DANGERS. 97

which, by the conditions of the loan, belonged to the
tax-payer and not to them. Our labouring population
has been defrauded of this money by the legislation
of Parliament in 1 816, which has arbitrarily taken it
from them and paid it to the bondholders.

X.

The fact is that the rapid extension of the Funding
System combined with thoughtless legislation has in-
volved us in a predicament hitherto unknown through-
out the history of the world. The worst of the diffi-
culty can be averted by plain, straightforward honesty
in financial legislation ; and what justice immediately
requires is simply the reopening of the mint for the
coinage of silver as well as gold. If, instead of this
being done, other nations should follow us in our
determination to have gold and not silver for unlimited
legal tender, then the labour of our working popula-
tion will become less and less remunerative, causing
discontent to spread among the labouring classes ;
whilst at the same time the increasing burden of the
interest on the debt will cause the supplies for the
army, navy, and civil service to be more and more
retrenched ; which must make those services degene-
rate, whilst the curtailment of pay will spread discontent
among them also ; and, in the midst of this national
discontent and trouble, a Wat Tyler, a John Hampden,
or a George Washington will rouse the nation to a

H

98 THE STANDARD OF VALUE.

new life by boldly telling the labouring classes that
they are a crowd of born slaves, toiling to pay taxes
levied partly to pay moneys squandered by genera-
tions who have gone to their graves, and partly to pay
an increase of the burden of that debt created by the
thoughtlessly fraudulent legislation of a Parliament
under the influence of the bondholders. Then, when
the labourer clearly understands his position, an end
will be put to the bondholders' rule, and it will be
fortunate for them if Parliament does not treat them
with an exaggerated form of the same injustice with
which the Parliament of 1816 has treated the national
debtor.

Nearly a quarter of a century ago I insisted that if
ever the course of events should make it suit the
British tax-payers to pay in the silver pound sterling
rather than in the, gold, they would boldly by word
and deed assert their right to do so, or gradually
become more and more helplessly chained by an in-
sidious and degrading bondage as the slaves of the
bondholdefs ; until at length unenslaved hordes from
Asia or Africa might trample alike on enslaver and
enslaved. I now merely with urgency recommend
Parliament to lose no time in reopening the mint for
the unlimited coinage of the silver crown (or some
other suitable silver coin) as well as the gold sovereign,
because, throughout all the history of the world there
has never been recorded any other financial crime so
mischievous and so foolish as that by which the gold

PROSPECTIVE DANGERS. 99

sovereign has been given its present position as the
sole representative of the pound sterling ; and if that
crime be not either annulled by the British Parliament
or else counteracted by enlightened and merciful legis-
lation on the part of other governments, it will practi-
cally reduce the labouring population of England and
to a lesser extent throughout the rest of Europe and
some other civilised countries, to a condition of slavery
a thousand-fold more degrading and revolting than
the system of negro slavery which the civilised world
has just repudiated.

H 2

*

i

V

1

APPENDIX.

CONTENTS.

PAGE

Replies in Discussion of the Paper on Lord

Liverpool's Oversight 103

Replies in Discussion of the Paper on the
Double Standard and the National

UlLDL •• •• •• •• •• •• •• ^5

Replies in Discussion of the Pamphlet on

the Pound Sterling 133

Our Modern Heliogabali 135

The Gold Craze 139

The Argentine Republic in the Silver

Question .. .. .. .. .. .. 142

REPLIES IN DISCUSSION

OF THE

PAPER ON LORD LIVERPOOL'S OVERSIGHT
AND ITS CONSEQUENCES.

To the Editor of the HERALD.

The opinion expressed in your leading article of
the 1 6th inst. to the effect that the bimetallists, though
beaten in the division on the above subject on the
14th inst, had really the best of the argument, en-
courages me to offer you a note of the objections then
urged by our opponents, together with brief answers
to them.

I. "Our gold standard is the cause of all our
greatness."

Answer : Bimetallists' consider that our prosperity
would have been greater under a legal continuance of
the double standard, because the change from that to
the gold standard, which did not practically occur
until 1873, has more or less disorganised trade and
industries of all descriptions.

II. " Lord Liverpool advocated the payment of the
interest of the National Debt in gold, because the
money was borrowed in gold."

Answer : This is a mistake as regards a mere matter

io4 THE STANDARD OF VALUE.

of fact, so that, according to the objector's own argu-
ment, he ought to agree with bimetallists in asserting
that, as the money was borrowed under the double
standard, the interest ought to be payable under that
same standard.

III. " You might as well insist on having diamonds
for legal tender as money/'

IV. "You might just as well insist on having the
mint open for the unlimited coinage of copper."

Answer : A law making diamonds legal tender, or
a law opening the mint for the unlimited coinage of
copper as legal tender, would constitute an injustice
to creditors on all current contracts, exactly similar to
that inflicted on debtors by the closing of the mint
against silver. We should consider it just as unjust
to open the mint for the unlimited coinage of copper
as to close it against either gold or silver.

V. "If an injustice was done in 1816, that is no
reason why another injustice should be done now by
changing back to the double standard."

Answer: There was no practical change in the
standard of value until the year 1873. The injustice
nominally done in 18 16 has only since 1873 com-
menced to have practical effect, so that a legal return
now to the double standard would not constitute
another injustice, but would merely remedy an exist-
ing injustice, whose mischievous effects may otherwise
become each year more serious.

VI. " It has recently become evident that there is

"SOMETHING WRONG WITH SILVER? 10

something wrong with silver. Everybody wants to
have gold and not silver, and, therefore, gold is the
only proper metal for legal tender."

Answer : Everybody who has debts to pay wants
the metal which is legal tender for those debts, and,
therefore, wherever gold and not silver is legal tender
everybody wants gold. The " something wrong with
silver " is a natural consequence of the recent closing
of the mints against it If the mints were, in the
same manner, closed against gold, and silver were
made the only legal tender, then everybody with debts
to pay would want silver, and there would soon appear
to be the same " something wrong " with gold. So,
also, if the factories were suddenly closed against the
manufacture of woollen articles, then sheep farmers
would very soon find " something wrong " with the
value of their stock. And if those farmers were
unable to understand why the cessation of the manu-
facture of woollen articles should reduce the value of
their sheep, then they would be on a par with those
commercial men who cannot understand what the
"something" is that is "wrong with silver." *

VII. " The production of silver is so erratic as to
make it unfit for a standard of value."

Answer : It is a mere matter of fact that the pro-
duction of silver is less erratic than the production of

* This might serve as an answer to some of the arguments sub-
sequently brought forward by Mr. Crump, to which I have alluded in
the Preface to this Edition. — Note to this Edition*

io6 THE STANDARD OF VALUE.

gold, so that, according to the critic's own argument, he
ought rather to advocate the closing of the mint against
gold than silver. The value of a double standard of
gold and silver would, however, be even less erratic
than that of a silver standard. The value of the gold
standard would be the most erratic of the three, and,
therefore, the critic's argument would be very good if
used against the gold standard ; but bimetallists do
not consider it sufficiently strong to justify the re-
pudiation of gold.

VIII. " The amount of payments settled in gold or
silver is so infinitesimal when compared with the mass
of payments made in bills, cheques, and bank notes,
that if silver were thrown out of circulation it would
not be missed."

Answer: The value of those bills, cheques, and
notes depends on the quantity of metallic money
current as legal tender for their payment, just as the
value of the currency bills held by the banks in
Buenos Ayres depends on the quantity of inconvertible
paper current as legal tender for their payment And
the withdrawal of half the metallic money in circula-
tion would therefore raise the value of all debts
payable in metallic money, just as certainly as the
withdrawal of half of the inconvertible paper in Buenos
Ayres would raise the value of all debts payable in
that currency.

The attempt to repudiate silver brought on a state
of crisis all over the world exactly similar to what

THE NATIONAL DEBT 107

would be caused in Buenos Ayres by a sudden with-
drawal or repudiation of a large mass of the incon-
vertible paper in circulation.

IX. "We don't want silver thrown out of circulation."
Answer : By closing the mints against the unlimited

coinage of silver, and allowing it to be legal tender
for small amounts only, it must of necessity be thrown
out of circulation ; for only a very small portion of
the existing stock would then be wanted by anybody.
Thus the critic simply declares that he does not want
to produce the effect which his conduct must of
necessity cause.

X. " Our present National Debt is not the same
debt which existed in 1816."

Answer: Since 18 16 we have paid off 100,000,000/.
more than we have borrowed since that date ; so that
all that remains is debt which existed in 18 16. That
debt has never been liquidated, but remains the same
debt; for there has not been an extinction of the debt
of 18 16 followed by the creation of a new debt ; and
therefore if no debt had existed in 18 16 there would
be no debt now. But even if this were otherwise, it
would not alter the question as a matter of equity ;
for the change from the double to the gold standard
did not practically occur until the year 1873. Every-
thing borrowed before 1873 was borrowed under the
double standard of value, and it is only since that date
that all debts in pounds sterling have been practically
changed from the double standard measure to that of

108 THE STANDARD OF VALUE.

the gold standard, which has been raised in value by
the closing of the mints against silver.

XL " No injustice is done as regards our National
Debt, because it is a question in which our own
Parliament legislates for ourselves, and it concerns
nobody else."

Answer : The debtor and creditor in the case are
both under the authority of the British Parliament ;
but they are nevertheless distinct interests. And not
only are the debtor and creditor in this case clearly
distinct, but also the debtor as regards the payment
of the capital is quite distinct from the debtor as
regards the payment of the interest on the debt.

To illustrate the separate interests involved in this
question, let us suppose Parliament were now to
decide to have the whole debt paid off, as advocated
by Ricardo.

The owners of landed property and real estate
would quickly perceive that they would have to sacri-
fice 20 per cent more of their property for the purpose
of paying off the debt under the gold standard than

1

under the double standard, and would naturally claim
their right to pay what was due according to the
standard under which the money was borrowed.

Parliament would then have to decide whether to
sustain the gold standard in the interest of the bond*
holders or to allow the mint to put silver in circulation
so as to return to the double standard in the interest
of the landowners. The question involved would be

BONDHOLDERS AND LABOURERS. 109

as to whether a certain amount of property should
belong to one set of rich men, the landowners, or to
another set of rich men, the bondholders, and the
interests of the country in general would not be much
affected by the decision.

The question is very different as regards the yearly
payment of interest on the debt ; for the creditor
and the debtor are then no longer respectively the
bondholder and the owner of real estate ; but on the
one hand the bondholder, and on the other the
labouring classes, whose labour is the source of
the yearly revenue from which the interest is paid.
Those are the respective interests between which it is
the duty of Parliament to see justice done ; and for
Parliament passively to allow the change of the
standard "of value, which occurred in 1873, to become
permanent would be an everlasting disgrace to the
intellect, or else, worse still, to the honour of the
governing classes in the country.

I do not hesitate to say that the manner in which
our enormous debt has remained unpaid from the
year 1 8 16 to the year 1882 is one of the greatest
scandals in history ; and also that the legal establish-
ment of our gold standard in 1 816 is, without any ex-
ception, the most gigantic breach of faith that has ever
been recorded throughout the history of the world.

It is shameful enough for Parliament to have
allowed so enormous a debt to run so long unpaid, thus
allowing the money-lenders to appropriate an immense

no THE STANDARD OF VALUE.

revenue every year from the earnings of the labouring
classes, instead of returning their capital to them to
invest in such a manner as to contribute to the
National strength, instead of being a source of weak-
ness ; but, whilst that debt is current, to allow of a
practical change of the standard of value to the detri-
ment of the labouring classes, who do not understand
how the profits of their labour are insidiously sucked
from them by the change, would be a far greater
disgrace to the present Parliament

Having given an answer to each one of the speakers
against bimetallism, I may point out that the resolu-
tion proposed on the 14th inst involved so limited a
support of the principle as to be no more than what
the English, German, French, and United States
Governments would all now acknowledge.

The bimetallist party may be divided into three
classes. — First : Those who consider that the reopen-
ing of the English mint for the coinage of silver at the
ratio of 15^ would practically restore the double
standard ; and that as long as the present National
Debt remains unpaid the mint ought to be open for
the unlimited coinage of silver as a mere matter of
justice towards the labouring classes. Secondly :
Those who think it requisite for England to join in
an international treaty for the re-establishment of
bimetallism. And thirdly : Those who wish England
to retain the legal establishment of the gold standard,
but nevertheless desire the English Government to

THE BIMETALLIST PARTY. 1 1 1

assist other nations to bring about a practical restora-
tion of the double standard at the former ratio.

All those parties would naturally agree as regards
supporting the resolution proposed on the 14th inst. ;
and it is evident that it practically has the adhesion
of the English Government ; and I believe that if the
question had been open- to free discussion (instead of
my being rigorously bound by the rules of the Society,
which allow the proposer to speak only once after
proposing the adoption of a resolution), it would have
been carried on the 14th inst.

U2 THE STANDARD OF VALUE.

To the Editor of the HERALD.

I have read with great interest Mr. Jordan's paper
on the above subject, as printed in your valuable
journal, but I am sorry that I have not been able to
rightly appreciate the meaning of some of his terms,
therefore I should feel it (as perhaps other of his
readers may) a great kindness if he would kindly
explain the following queries : —

ist What is meant by the " standard of value " ?

2nd. Is this " standard of value " to be of coin, or
bullion, or merchandise ?

3rd. Do the bimetallists advocate two standards
" of equal value," one of gold and the other of silver ?

I shall feel very thankful if he would kindly assist

An Anxious Inquirer.

June 20, 1882.

To the Editor of the Herald.

I have much pleasure in handing you the following
replies to the questions addressed to me by your
correspondent " An Anxious Inquirer."

ist The standard of value is whatever may by
agreement be referred to for the purpose of giving an
idea of the values of things, just as the standards of
weights and measures are referred to for the purpose
of giving an idea of the length or the weight of

THE DOUBLE STANDARD. 113

anything. It is, however, impossible to have an
absolutely fixed value for a standard as in the case of
a standard weight or a standard measure.

2nd. Neither coin nor bullion nor merchandise are,
nor can they conveniently be made, standards of
value. Gold and silver are both well recognised
standards of value in the civilised world, and coins are
made from them as a matter of convenience, because
the stamp guarantees the quantity and the quality of
the metal ; but all gold in the shape of bullion or
ornaments is just as much a part of the gold standard
as gold in the shape of coins.

The standard of the coinage must not be confused
with the standard of value, for that merely indicates
.the quantity of other metals legally mixed in the
coinage with the metal used as a standard of value,
and it varies in different countries having the same
standard of value just as, also, the value of the
unit, or principal coin of account, differs in different
countries having the same standard.

3rd. When both gold and silver are current in any
country as full legal tender, with the mint open for
the unlimited coinage of both metals, then the two
metals jointly form one standard of value. This was
the case from time immemorial until the year 1873,
since which date gold and silver have formed two
separate standards of value.

For the purpose of having a standard of the two
metals, it does not matter what relative value may be

I

U4 THE STANDARD OF VALUE.

placed on them by the mint for coinage. The rate
may be 10 of silver to one of gold, or 20 of silver to
one of gold. In the former case more silver would be
coined than hitherto, and less "would be used for other
purposes ; and in the latter case more gold would be
coined and less would be used for other purposes ;
but in either case the whole stock of gold and silver
jointly, whether coined or uncoined, would be the
standard of value * Bimetallists want the legal res-
toration of that one standard of value, i. e. the double
standard which existed until 1873. That is to say,
we want to have one standard only, instead of the
two which now exist. The fact of the ratio of 15^
having recently existed, makes it desirable for that
ratio to be restored with the restoration of the
standard.

June 22nd.

V

* I have pointed out, in the foot-notes on pages 20 and 63, that
the above point has noY been properly understood. — Note to this Edition,

REPLIES IN DISCUSSION

OF

THE PAPER ON THE DOUBLE STANDARD AND

THE NATIONAL DEBT.

•+0+-

THE first speaker against the resolutions quoted the
opinion of John Stuart Mill in favour of a single
standard, considering the maintenance of a double
standard impossible because the cheaper must drive
out the dearer metal.

If one country only had the double standard, and
of the other countries, some the gold and others the
silver standard, and if silver were brought to the silver
mints for coinage in so much greater amount as to
make its excess beyond the value of the new supplies
of gold greater than the value of the gold circulating
in the bimetallic country, then the gold would be
driven from the latter country.

A smaller supply of silver than the value of the gold
in circulation in the bimetallic country, or a smaller
supply of gold than the value of the silver in that
country, would simply change the relative amounts
circulating there, without changing the relative value
of the two metals.

I 2

n6 THE STANDARD OF VALUE.

As soon as the fresh supply of either metal became
large enough to drive all the other metal from the
bimetallic country, then the relative value of the two
metals would change, and would continue to fluctuate
with every change in the relative supply and demand.

In either case, the more abundantly supplied, not
necessarily the cheaper metal, would drive the other
from the bimetallic country.

But what has this to do with the question of
universal bimetallism ?

Under the bimetallic system, the metal which
yielded most profit to the miner might become the
more abundant; but, in telling us that the cheaper
must drive out the dearer metal, without telling us
where that dearer metal is to be driven, the speaker
makes, I think, an inconsiderate assertion.

If, from the question of universal bimetallism, we
turn to the question of the practicability of its main-
tenance in any one, or in any two countries, then we
merely have to consider whether the quantity of the
two metals held by those countries is such that any
possible excess of the supply of one metal above the
supply of the other metal can or cannot be equal
to the supply of the latter held by the bimetallic
countries.

I have shown that France and England combined
are obviously able to sustain bimetallism against any
possible supplies of silver, without inconvenience to
their circulation ; and I have argued that England,

JOHN STUART MILL. 1 if

under existing circumstances, could by her initiative
action reinstate the practical working of bimetallism
throughout the world, because it would obviously be
the interest of France and the United States to support
her action.

Sir Isaac Newton and Napoleon Bonaparte, when
they dealt with the subject, took a more practical view
of it than John Stuart Mill. They fairly faced the
fact that both gold and silver had, by virtue of their
own intrinsic merits as mediums of exchange, or
measures of value, forced their way into a universally
recognised and well-established position. Those
metals had been freely accepted in payment for labour
and property, on the universal understanding that they
would continue to be equitably exchangeable in the
same manner.

Under those circumstances, for the law to legalise
the position of one of the two metals, and to disregard
the other — that is to say, to make one and not the
other unlimited legal tender — would constitute not
only a breach of faith with the holders of the disre-
garded metal, but would also directly favour the
holders of the other metal ; seeing that the desirability
of holding the legalised, rather than the unlegalised
metal, would naturally enhance its value.

Besides this consideration, there comes the still
greater breach of faith in every current contract ; for
the debtor becomes forced by law to pay in a metal
artificially enhanced in value by that same law.

u8 THE STANDARD OF VALUE.

For these practical reasons the authorities to which
I have alluded successfully advocated the establish-
ment by law of a double standard in England and
afterwards in France ; though both authorities, as each
was legislating for his own country alone, recognised
the right of the law to regulate the relative value of
the two metals in such a manner as to suit the
convenience of the circulation.

Newton and Bonaparte both took too broad and
practical a view of the question to allow of their
advocating a disregard of the terms on which, on the
faith of a tacit understanding which had been the slow
growth of ages of gradually increasing faith between
man and man, gold and silver were held as measures
of value by those who had obtained them in return for
value given.

For these reasons, I say that the speaker based his
avowed intention to vote against both resolutions on
an opinion of John Stuart Mill, which does not
constitute a serious argument against the first resolu-
tion; and which, by a mere assertion, adversely decides
a minor question at issue in the second resolution,
without touching the merits of the main point. ,

The second speaker fluently accused me of arriving
at conclusions at variance with my arguments, and of
advancing arguments unsupported by facts.

All I have said is permanently recorded in this
paper, which will, I think, vindicate itself against such
an accusation. I was indeed half afraid that I had

THE NATIONAL DEBT. 119

perhaps made a wearisome repetition of some of the

leading facts on which the arguments are based.
»

As an instance of the absence of requisite facts, he
said I should have told what the amount of the debt
had been at various epochs, and how much had been
raised since 1816.

I have told you that the first important amount of
debt was incurred during the revolution of 1688 ; that
in 1 8 16, when the silver standard was abolished, its
amount was 850 million^ ; and that it is now about 750
million £i I might easily have loaded my paper with
more statistics of the debt, but no more were required
for the purpose of the present discussion. For those
figures show that not only has all the money borrowed
since 18 16 been repaid, but also 100 millions of that
previously borrowed ; so that all the existing debt
was borrowed whilst silver was unlimited legal tender
in England.

If, by his criticism, the speaker meant to imply that
all that has been borrowed since 18 16 must be con-
sidered to be still unpaid, on the plea that the subse-
quent payments must be considered to have ex-
tinguished the older portion of the debt, then that is
an assertion which I cannot admit ; for it is evident
that if there had been no debt in 18 16 there would be
no debt now ; for, we have paid off 100 millions more
than we have borrowed since that date.

Even, however, if we admit the speaker's view of
the matter — even then, though the legal technicalities

120 THE STANDARD OF VALUE.

of the question are modified, or partly modified,
its intrinsic merits as a question of equity remain
unchanged.

For, though England abolished the legal action of
the double standard in 1816, it was nevertheless
practically maintained by the action of other nations
until 1874 It was only in the latter year that the
effect of the English law of 1 8 16 became apparent,
in the relative depreciation of silver, which results
from the enhanced value which gold acquires in
consequence of the legal status given to it and not to
silver.

As the relative value of gold and silver was main-
tained up to 1874 in s pi te of the English law of 18 16,
all the money borrowed during that interval has
practically been received under the bimetallic system ;
and, therefore, as a matter of equity it is as unfair to
enforce its payment in gold, after the practical collapse
of that system, as to enforce the payment in gold of
the previous loans borrowed with the legal right to
pay in silver.

All this is, however, quite beside the true merits of
the case ; for the existing debt all existed before 18 16,
and was therefore all borrowed with the legal right of
repayment in silver.

The speaker also objected to the double standard,
on the ground that by it silver mining would be en-
couraged. And why should it not be encouraged as
well as gold mining ? A part of the gold coined at the

NATURAL LIMIT TO MINING. 121

English mint has cost the miner five shillings an
ounce, and on its being coined for him he finds it
worth in his hands more than eighty-four shillings an
ounce. No such encouragement to silver mining can
be given by its legal tender rate of five shillings an
ounce, as that encouragement given to gold mining
by its legal tender rate of 3/. 17s. \o\d. an ounce
standard.

But, the fact is that no permanent difference can
be made in the number of men employed in mining
under the single or the double standard, for if too many
should engage in mining, either for gold or silver
alone, or for both, the purchasing power of legal
tender metal would quickly decline sufficiently to
make it requisite for them either to turn to other em-
ployments or to starve for want of a sufficient yield of
metal to maintain them at the enhanced range of prices.

The speaker also says there is no reason why silver
should go out of circulation, even if not acknowledged
as legal tender.

But, even admitting that adverse laws cannot drive
silver out of circulation ; even so, if it is true that
silver can and will sustain itself in spite of laws, it is
all the more expedient that its position should be
recognised by law.

But the fact is that France will not coin silver
whilst England and Germany close their mints against
it. And if permanently repudiated by those three
countries, it is probable that the rest of Europe and

122 THE STANDARD OF VALUE.

the United States will endeavour to establish sole
gold standards as a matter of convenience. Thus the
purchasing power of silver in its reduced area will be
diminished, and the purchasing power of gold in its
enlarged area will be increased, and the relative value
of the two will fluctuate from the new basis of value,
in accordance with each fluctuation of relative supply.

If England does not act promptly, all power to
control the relative value of the two metals may
vanish in consequence of the increasing difficulty
resulting from delay. And then, by the legislation of
foreign nations, the burden of the English National
Debt may be doubled or trebled, or caused to fluc-
tuate in accordance with the vagaries of their legis-
lation. *

If foreign legislation should be such as to bring
about any important or permanent change in the rela-
tive value of the two metals, it will then become im-
possible for the English Government to ignore the fact
that, as the National Debt has been borrqwed under
the bimetallic system, precisely the same injustice is
done to the debtor by any limit being placed to the
legal tender of either gold or silver as would be done
to the creditor by the free coinage of copper as
unlimited legal tender. The question is a thoroughly
practical one ; and not dependent on individual
fancies as to what constitutes the best medium of
exchange.

The speaker's suggestion as to allowing some other

VALUE OF FIXED INCOMES. 123

metal to supply the place of silver, cannot enter into
the merits of the present discussion. The re-acknow-
ledgment of silver is what is practically requisite.
Its equitable substitution by a more valuable metal
is a more difficult question which it will be time
enough to discuss if the re-admission of silver should
entail any such inconvenience as to warrant such a
substitution.

What thoroughly amazed me in this speaker's
observations was his assertion that Mr. Barclay's
argument to the effect that the rejection of all the
silver in circulation would naturally enhance the
purchasing power of gold, is based on a fallacy.

If the speaker could persuade all who are now in
favour of gold monometallism that the general level
of prices must remain the same whether silver is
universally repudiated or universally admitted as
unlimited legal tender, the cause would, I think, lose
one-half of its present supporters. For many among
the holders of fixed incomes regard it merely as a
matter which affects the value of their incomes, and
consider that the more money is kept out of circula-
tion the greater must be the value of those incomes.
If this could be shown to be a fallacy, then many of
those supporters of the gold standard would doubtless
cease to trouble themselves about the matter.

Leaving, however, this narrow and directly selfish
view of the matter for broader considerations, the self-
interest even of the Army and Navy is with the re-

124 THE STANDARD OF VALUE.

admission of silver ; for, if its repudiation should result
in any great increase of the burden of the debt, there
will certainly be less of the country's resources avail-
able for the support of those services. Even under
existing circumstances there can be no doubt that
they are not so adequately supported as they would
be if the country were not burdened with debt. How
then will the requisite supplies for them be obtained
if the interest on the debt should be allowed to absorb
twice as much of the country's available resources as
it does at present ? An undue extension of the debt
must result in the ruin of the Army and Navy, and
then- in that of the country.

What amazed me even more than the assertion just
considered was the argument on which it was based.

The speaker told us that 300 millions sterling of
accounts are settled every week in London without
the intervention of metallic money ; and that the
amount of paper money, cheques, and bills, by which
these accounts are settled, is so great, compared with
the amount of metallic money in circulation, that no
possible increase or decrease of the latter can really
affect prices.

This argument follows that by which I endeavoured
to show that the universal repudiation of the 720
millions sterling of silver now in circulation would
simply form a more world-wide, though similar dis-
aster, to that which would result from the repudiation
of the existing Bank of England notes.

EFFECT OF DISCARDING SILVER. 125

If even the Bank of England notes were repudiated,
would not the fabric of credit alluded to collapse ?
And, in the absence of those notes, would not business
in England be resumed, after the crisis caused by
their repudiation, at a lower level of prices ?

Even a partial withdrawal of notes, or extra freedom
in their emission, affects prices. How, then, can it be
suggested that a wholesale repudiation of either the
silver or the gold in circulation would not affect
prices ?

If every twenty ounces of silver repudiated were
replaced by a five pound note of inconvertible paper
accepted as legal tender universally, then prices would
be maintained as silver was withdrawn ; but such
paper would be a sorry substitute for the silver. And
such substitution is impracticable.

The fact is that, just as the value of any given
nominal amount of local currency bills and cheques
in this city depends on the total amount of the cir-
culation of the inconvertible paper in which they are
payable ; so also the value of the 300 millions sterling
of bills, cheques, and bank notes referred to, depends
on the total amount of the circulation of the coin in
which they are payable.

A reduction of the amount of metallic money which
is legal tender all over the world, must enhance the
value of any given nominal amount in bills, cheques,
or bank notes based on, and payable in that metallic
money, just as certainly as a reduction of the amount

126 THE STANDARD OF VALUE.

of inconvertible notes in the Argentine Republic
would enhance the value of a bill for iooo dollars
currency.

The third speaker made an able defence of the
bimetallic system if universal ; but objected to the
second resolution, on the ground that it would lead
to England being flooded with silver. He made,
however, no definite reply to the arguments by which
I have endeavoured to show that under existing cir-
cumstances it would not have such an effect ; and he
left entirely unnoticed the arguments by which I have
shown that, even if such an effect were certain to
result from the re-adoption of the principle of bime-
tallism, it would nevertheless be expedient for England
to act on it.

The fourth speaker also supported the principle of
bimetallism, but objected to its adoption by England
unless under an international treaty for joint action
with France, or a combination of other countries.

The speaker seemed to overlook the argument by
which I endeavoured to show that the first effect of
the re-adoption of bimetallism by England would
naturally be a practical arrangement between the
authorities of the English and French mints for their
mutual guidance, and that the mint authorities in the
United States would be only too ready to support
such measures as might be adopted to reinstate silver.

I argued that the attempt to repudiate silver origi-
nated in the English law of 1816, and that on the

GERMANY AND ENGLAND. 127

abrogation of that law the self-interest of the various
countries would naturally reopen their mints to silver.

I contend that the mere removal of a restrictive law
now in force in England, will practically achieve the
object in view, without any formal celebration of
international treaties.

This speaker eloquently denounced the recent
conduct of Germany in this matter, and argued that
that country had no right to disturb the commercial
world simply for the sake of forcing a gold instead of
a silver circulation into Germany. Admitting the
speaker's arguments, he should have looked beyond
them to the fact that Germany so acted because
England had done so in 18 16. England then placed
the corner stone on which the crime has been founded.
It is therefore England's duty to take the lead in the
work of reformation, and I have also shown that
England is more interested than Germany in the
matter.

France long stood alone in resisting the crime of
repudiation. And, though now bending before the
storm raised by the monometallists, is ready, under
existing laws, now merely held in abeyance, to rally
to the support of any powerful nation that may make
a stand in the cause of honour.

The next opposition speaker argued that it is not
desirable to have two currencies. And that gold is
less subject to fluctuation than silver.

We have to deal with the fact that two currencies

128 THE STANDARD OF VALUE.

actually do exist, and that the repudiation of either
constitutes a crime towards the holders of that cur-
rency, and involves another crime towards every
debtor, seeing that such repudiation enhances the
value of the remaining currency in which he becomes
forced to pay his debts.

As regards the second argument, the fact is that the
supply of silver has fluctuated less than the supply of
gold, and the apparent steadiness in the value of gold
is due to the mints having been freely open for its
coinage whilst closed against silver.

The next speaker, who opposed the second resolu-
tion, grasped the true question at issue, and he pointed
out that on one occasion in this country, after a great
change in the legal measure of value had been caused
by an excessive issue of paper money which had
become inconvertible, a special law was passed in-
creasing the nominal amount of all contracts entered
into before the occurrence of the depreciation of the
measure of value.

The speaker argued that, what equity now requires
in England is some such practical measure for the
protection of the national debtor. He pointed out
that, whereas in this country the creditor on contracts
of long standing was specially protected against the
effects of the increased quantity of legal tender notes :
in England the national debtor now requires special
protection against the effects of the repudiation of
silver by the law of 1816.

*•■•

INJUSTICE OF THE LAW OF 1816. 129

The speaker, whilst advocating a practical measure,
did not suggest any special measure, and overlooked
my argument to the effect that /^'practical measure
now requisite is merely the immediate readoption of
the principle of bimetallism by England.

The distinguished Argentine to whom I am now
replying was the only opposition speaker who really
faced the main question at issue. With that excep-
tion, the opposition exemplified the character of that
ponderous but timid bird which buries its head in the
sand in the hope of avoiding the hunter's shaft.

A new edition, which has recently been published
in England, of the essay on Bimetallism read by Mr.
Barclay before the Literary Society on the 26th May
of last year, contains a footnote commenting on the
injustice of the parliamentary legislation of 1816,
which was the theme of the essay read by me on the
28th July of the same year. And, as the two essays
now appear in print, it would appear to any reader
that the latter is a mere extension of Mr. Barclay's foot-
note, whereas in reality the footnote is an acceptance
by Mr. Barclay of the principal argument of the latter
essay. Though it is evidently through an oversight
that Mr. Barclay has allowed his footnote to appear in
such a manner as to allow of its, creating an erroneous
impression in this respect, I must in self-defence warif

K

130 THE STANDARD OF VALUE.

readers of the two pamphlets against regarding mine
as a mere plagiarism from that footnote. A special
reason why that note should not have appeared
without anything to show clearly that it is a recent
addition to the essay, is Mr. Barclay's strong oppo-
sition to the argument when I used it in support of
his resolution on the 26th May. Mr. Barclay seemed
then to resent my carrying away the argument from
the ground of commercial convenience to that of the
rights of the labouring classes, and declared his desire
to separate himself entirely from the arguments used
by me in support of his resolution. Few, even now,
in discussing the relative merits of gold or silver or
double standards of value, fully realise the fact that
the pound sterling is what it is because the National
Debt has made it what it is, and that every penny of
the interest paid on that debt reduces directly or
indirectly the wages of the labouring classes.

In the short time which has elapsed since I read the
paper in which I endeavoured to show that the
repudiation of the National Debt by Act of Parlia-
ment would be a natural sequel to the repudiation of
silver, unless the law by which silver was demonetised
in England were repealed, we have witnessed a great
confiscation of property, or repudiation of the rights
of holders of property in Ireland, effected by Act of
Parliament on the plea of necessity. The fact (to which
I have elsewhere alluded) that since the year 1873,
the law by which the double standard was repudiated

INEXPEDIENCY OF THE LAW OF 1816. 131

in England has arbitrarily confiscated at least
20,000,000/. sterling from the pockets of the labouring
classes in England and paid it to the bondholders as
a bonus beyond the value of the interest due to them,
is a comparatively trivial part of the mischief done by
the attempted repudiation of silver. The great evil
has been the stoppage of trade and the check to the
production of wealth caused by the disorganisation of
the currency. The English law of 18 16 did not begin
to have the practical effect of enhancing the value of
gold until 1873, ^d then ft not on ty steadily swept
away the margin for profit on each commercial
transaction, but, by breaking down prices, checked
manufactures and industries of all descriptions.
Wherever the natural difficulties for the creation of
wealth may be greatest, or the population may be most
thriftless or indolent, that strain on the currency must
soonest become unbearable, and none, who appreciate
the importance of the enhancement of the value of
gold caused by the demonetisation of silver, can think
it unreasonable to assume that if the prosperity of the
world had not been artificially checked in 1873,
Parliament would not have been called on to repudiate
rights acquired by purchase in Ireland. Newton in
England and Bonaparte in France gave practical
evidence of having realised the fact that the law must
acknowledge or adapt itself to rights which become
rights by the slow process of natural selection. Gold
and silver have grown into the position they hold as

K 2

132 THE STANDARD OF VALUE.

circulating medium by that process, and if the law by
which Parliament in 1816 repudiated the rights of the
holders of silver continues to be sustained and be not
counteracted by the legislation of other countries, then
Parliament will find itself gradually hurried from one
act of repudiation to another until all rights of property
are swept away. The attempted demonetisation of
silver is a blow at the acquired rights of property
which is felt all over the world, and seems to me to be
the most dangerous disaster that civilisation has
encountered in its growth since, with the gradual
strengthening of those rights, mankind slowly emerged
from barbarism. I will not however go further on this
subject beyond the object for which I commenced this
article, which was to prevent the risk of the pamphlet
I published last year appearing as a plagiarism, or, at
best, a mere extension of Mr. Barclay's footnote,
which has with some others been attached to Mr.
Barclay's paper since the publication of mine, and
which is, in reality, Mr. Barclay's acceptance of an
argument which he strenuously opposed in Buenos
Ayres.

REPLIES IN DISCUSSION

OF

THE PAMPHLET ON THE POUND STERLING,
ITS HISTORY AND CHARACTER

To the Editor of the HERALD.

ALTHOUGH I not long ago resolved not again to
enter into discussion with any anonymous writer, the
chivalrous tone in which your 'correspondent has
attacked my pamphlet on the above subject, induces
me to offer some remarks on his criticisms.
Your correspondent says :

" It is evident, by the whole statistics given, that the National
Loan was made at times when more than ordinary inducements
were held out to the lender in order to secure the means of
prosecuting the great objects of State."

I wish first to point out that in this statement your
correspondent has opened a new question, which I
had not touched, or alluded to in any of my writings.

I have merely accepted the fact of the debt having
amounted to 850,000,000/. in 18 16. My arguments
have nothing to do with the question as to whether
the terms on which it had been raised were easy
or hard on the debtor, but are intended merely
to point out or explain the injustice committed

134 THE STANDARD OF VALUE.

by Parliament in changing that debt of 850,000,000
pounds sterling into a debt of 850,000,000 gold
sovereigns.

I have argued that if Lord Liverpool and his
colleagues had properly understood the importance
of the distinction between those two amounts they
never would have advocated such a change, and that
the only valid excuse to be made for the Parliament
of 1 816 is that they made the change "by mistake."

Lex dederunt sed non lex dixerunt

Secondly. Your correspondent's argument that :

" Parliament, or the people, borrow from the people, and this
people have a right to pay themselves in silver, but the people,
or Parliament, which is the same thing, say they must pay
themselves in gold,"

though serving as a prelude to a plausible disquisi-
tion, is really superficial ; for the interests in question
are really distinct, the nation being the borrower and
individuals the lenders of the money. And it also
ignores the fact that the vast majority of the labour-
ing population, who are the tax-payers, and not bond-
holders, were not represented in Parliament in 18 16.
They did not know what Parliament was doing.

I have endeavoured to show that, if the law of 18 16
be not quickly annulled, the action of foreign legisla-
tion may create such conflicting interests between
debtor and creditor, as may make the question quite
unmanageable in Parliament, and ultimately compel
the labouring classes to take the matter into their own

OUR MODERN HELIOGABALL 135

hands in a manly manner unless they pusillanimously
flock in rapidly increasing numbers into the alms-
houses and workhouses, to meet a destiny of whole-
sale starvation as soon as the increase of those esta-
blishments becomes too great to be supported by
the wealth of the country.

OUR MODERN HELIOGABALL

To the Editor of the Herald.

Between six and seven years ago the London Board
of the late Mercantile Bank instructed their Envoy
Plenipotentiary in Buenos Ayres to make me under-
stand that " the Board wanted a manager to obey
their orders, and not a dictator to tell them what they
must do," though any Board of Directors not be-
wildered by the difficulties of a situation with which
the then ruling majority of its members were quite
incompetent to grapple, would clearly have under-
stood that the " musts " to which they objected did
not mean that "to suit my own purposes," I com-
manded them to allow the course I indicated to be
adopted, but merely that it appeared to me (in a
better position than they to judge) that the non-
adoption of that course must of necessity be ruinous
to the interests of the shareholders of the Bank. So
also, when I and some other advocates of bimetallism
say that England must re-adopt the silver standard,

136 THE STANDARD OF VALUE.

we do not mean to assert that it is absolutely im-
possible for the restoration of that standard to be
prevented, but merely that any such legislation as
may make its restoration unnecessary will be exces-
sively disastrous to the country in other respects ; and,
as you did me the honour of giving prominence to
the paper I read before the Literary Society in which
I expressed the opinion that Parliament must restore
the silver standard, I ask you to allow me to protect
myself in your columns, by the clear enunciation of
the above saving clause, from the risk of a misunder-
standing similar to that above alluded to. I ask you
to publish this rider to the opinion already published,
because I perceive by the English papers received by
the last mail that Parliament has actually commenced
a course of legislation which, if systematically per-
sisted in, may render the re-adoption of bimetallism in
England not only quite unnecessary but even perhaps
as mischievous as its abolition actually has been.

The value of the gold pound sterling is now nearly
20 per cent, more than that of the silver pound which
was nominally abolished in 18 16 and practically
abolished in 1873 ; and the new Land Court just
established by Act of Parliament in Ireland has,
according to the Times of the 4th ult.,* authorised a
reduction of even more than 20 per cent, on one of
the contracts between landlord and tenant which has
been brought before them. Of course if all written con-

* November, 1881.

OUR MODERN HELIOGABALL 137

tracts are to be revised in this rqanner, allowing debtors,
by special Act of Parliament, to pay in gold 20 per cent,
less than the amount of pounds sterling they have
contracted to pay, they will naturally be even better
pleased than if compelled to adhere to their contracts
but allowed to pay in the silver pound in which they
are equitably entitled to pay every contract signed
before 1874.

By the systematic pursuance of the course in-
augurated by the Irish Land Court, Parliament may
certainly get rid of the necessity for restoring the
silver standard, but that course appears at present to
involve a task in comparison with which all the
recorded labours of Hercules shrink into insigni-
ficance ; and which might have been avoided, even
without readopting the silver standard, by the simpler
course of authorising all debtors on contracts dated
before 1874 to pay in gold the equivalent of the silver
pound instead of the full gold pound. This would
have done quickly and thoroughly what the Land
Court appears bent on doing laboriously ; and by
such a course Parliament might have avoided the
dangerous precedent of arbitrary interference with
individual contracts. The mere restoration of the
silver standard in 188 1 could not perhaps have been
quick enough in its action to save the lives of the
Irish landlords, but it does not appear that it would
even now be too late to save the just rights of owners
of property, including the bondholders, in England.

138 THE STANDARD OF VALUE.

It must be borne in mind that every contract
revised in the manner effected by the new Land Court
makes it more difficult than before to arrange an
equitable adjustment between the national debtor
and the national creditor; and also that it is quite
ridiculous to suppose that the people who would
neither submit to King Charles's claim to levy Ship
Money, nor to King George's Tea Tax, are likely to
continue to submit to be swindled to the extent of
about 20 per cent every year by a parcel of bond-
holders.

M'Culloch refers to the change of the standard of
value brought about by increasing the value of the
current coins as "a method of swindling first practised
in the worst times of the Roman Empire." The
Emperor Heliogabalus, being legally entitled to a
fixed amount of money for certain taxes, increased the
value of that income by raising the value of the coins
at the national expense. His and all other perform-
ances in that line have however, as far as I have been
able to ascertain, been quite trivial compared to the
manner in which the equivalent of 120,000,000/.
sterling of debt has been placed on the British tax-
payer, since 1873, by the change of our silver debt
into a gold debt ; and though Heliogabalus ventured
so far as to order heavier coins to be made, so as to
increase the value of his income, he never ventured on
so barefaced a proceeding as to pay in silver what
was borrowed in gold, or to claim in gold what was

THE GOLD « CRAZE* 139

due in silver. The latter modification of his " method
of swindling " is an audacious novelty, which seems to
have been specially reserved for the display of the
originality of the genius, or the folly, of Lord Liver-
pool ; and if our modern Heliogabali, who now have
the value of their incomes increased by Lord Liver-
poors Heliogabalian Act, endeavour to continue to
induce Parliament to require money borrowed pay-
able in silver to be paid in gold, then the debtors will
before long induce Parliament to declare that, in ac-
cordance with precedent, that same money, borrowed
payable in silver, may, by way of a change, be paid
in copper or in paper ; and therefore, notwithstanding
the manner in which the action of the new Land
Court practically defends for a time the present posi-
tion of the bondholders, it would be wise on their part
to accept, whilst they can, the restoration of the silver
standard.

THE GOLD " CRAZE."
To the Editor of the HERALD.

The article from a New York paper, under the head
of "The Silver Craze," which has appeared in your
columns to-day, reminds me of the celebrated French
lawyer, who spoke splendidly, but forgot in his speech
the sheep which were the object of his suit, until, at
length, his client cried out in despair, "Revenons d

Ho THE STANDARD OF VALUE.

nos moutons ; " so please allow me to recall attention
to the origin of this question.

Until quite recently all holders of either gold or.
silver could please themselves as to whether they held
it in the shape of coin or otherwise. Under this con-
dition of affairs, a group of financiers suddenly, for
reasons into which I need not enter, got into their
heads the idea that it was desirable to deprive holders
of silver of that privilege and to make gold alone the
standard of value.

The propaganda (commenced in 1867) for the
general adoption of the gold standard resulted in the
holders of silver finding themselves deprived (in the
year 1873) of the right of having it coined; and the
price of silver then quickly fell from 6od. per oz. to 47^.

In order to check the mischief done by the rapid
change in the relative value of silver and gold, the
mints of several nations were successively opened for
the coinage of limited amounts of silver, and under
this condition of affairs the price has recovered to $id.

These measures are, however, merely palliative, and
it is gross misrepresentation to endeavour to make it
appear that bimetallists fancied it possible for the
former par of about 6od. per oz. to be restored by any
such measures. Silver and gold had a relative value
of I Si to I when the law left it entirely to the holders
of those metals to decide what quantity of either metal
should be coined at that ratio, and what quantity
should be used for other purposes. But now that the

THE GOLD " CRAZE? 141

law has taken upon itself to decide what quantity of
silver may be coined, whilst the holders of gold still
retain their former right, there is naturally an increased
demand for gold, for it has an extra value in con-
sequence of being the only metal which commands the
right of being coined. Up to the year 1873 it shared
this value, or right, with silver ; but it now has the
value of which silver has been deprived.

It is perfectly absurd to suppose that bimetallists
ever imagined that the present palliatives could restore
the former value of silver in relation to gold. The
restoration of that value can only be attained by the
law ceasing to meddle, in the way of attempting to
decide what quantity of either metal is to be coined.
Bimetallists merely protest against the propaganda
initiated by those who, to suit their own purposes,
have taken a special fancy to gold. We have no
special fancy for silver, but contend that it ought to
be left to the holders of gold and silver to decide, as
formerly, what to have coined and what to use other-
wise; and, therefore, if the term " craze " is to be
brought into the discussion of this question, an article
on the subject might much more appropriately be
headed " The Gold Craze " than " The Silver Craze."
It would be ridiculous to expect that people could do
otherwise than continue to prefer to have gold rather
than silver as long as gold commands the right of
coinage and silver does not ; and in accusing us of
such expectations our opponents merely give a new

142 THE STANDARD OF VALUE.

indication of the manner in which some of them allow
themselves to be guided by fancy for lack of reason.
But at the bottom of the whole question there lies the
fact that the closing of the mints against silver en-
hances the value of the large National Debts which
now exist. The money-lenders, as a rule, understand
this well enough, but the labouring classes, who pay the
yearly interest, do not yet understand it The issue
is a very practical one, and not a "craze" on either
side.*

THE ARGENTINE REPUBLIC IN THE
SILVER QUESTION.

" I do not rhyme to that dull elf,
Who cannot image to himself,
That all through Flodden's dismal night,
Wilton was foremost in the fight."

I do not write this article for those who either
cannot or will not understand the cause of the present
separation of the gold and the silver standards of
value, which, until recently, combined to form a
double standard.

I purpose merely to point out to those who already
understand the practical action of such a separation
the manner in which the foreign loans of this country

* If it were not that the above article was published before
Mr. Crump's hook, to which I have alluded in the Preface to this
Edition, it might be offered as a reply to a considerable portion of that
book. — Note to this Edition,

FOREIGN DEBTS IN LONDON. 143

have been affected by it, and also the course of legisla-
tion which is best suited to the interests of the country,
from a financial point of view.

For this purpose a very few words will suffice for
the initiated, though, for others, it might necessitate a
long dissertation, embracing, perhaps, even the alpha-
bet of finance.

The Argentine Republic owed in London, in the
year 1873, more than ten millions sterling, and the
collapse of the double standard, which occurred in
that year, has practically added a value of two
millions sterling to that debt, by making a present
debt of 10,000,000/. equal to the value of a debt of
12,000,000/. in 1873.

The Argentine Government have actually paid in
London, during the past nine years, very much more
than a value of 1,000,000/. in the excess of the value
of interest caused by the change from the double
standard to the gold standard. And they are this
year paying a value of 120,000/. more than would be
required from them if the double standard had been
sustained.

The change of the standard of value is now causing
a yearly transfer of wealth from the Argentine
Republic to the money-lenders in London equivalent
to the value of 120,000/. This change of the standard
tells against the Argentine Republic and in favour of
the money-lenders in London, just exactly in the
same manner as it tells against each individual tax-

144 THE STANDARD OF VALUE.

payer in England to the benefit of those same money-*
lenders, which latter are now getting out of the people
of England an extra value of more than 4,000,000/.
every year by the action of the change of the standard
of value.

The London money-lenders are the only individuals
who profit by the change of the standard, whilst the
overwhelming majority of the people of England, and
more especially the labouring classes, are mulcted for
their benefit just in the same manner as each foreign
nation with a sterling loan is mulcted.

Shakespeare has given us a pretty parallel to the
present position of affairs in his tale of the Merchant
of Venice.

Shylock induced Antonio to sign the contract for
the pound of flesh, not, as he assured the latter, for the
sake of any advantage which Shylock could himself
obtain from such a contract, but merely as a " merry
jest;" in fact, just to please Shylock's fancy; but,
when the bond came due, then the fancy became a
stern purpose.

So also Lord Liverpool, the great special pleader
for the interests of the money-lenders, induced Parlia-
ment to abolish the silver standard, not, as he assured
them, for the purpose of giving any individual any
pecuniary advantage, but merely because he fancied
it nicer and more convenient to have only one metal
for unlimited legal tender.

But now that the Act of Parliament, which was

FOREIGN DEBTS IN LONDON 145

obtained under the plea of its being merely a measure
of convenience in the money market, and not in any
manner advantaging the money-lenders, has, neverthe-
less, had the practical effect of giving an extra 20 per
cent, to the money-lenders, they claim a technical
right to that extra 20 per cent, as boldly as Shylock
claimed his pound of flesh.

I take the liberty of warning them to pause and
consider well their position. Let them consider well
the bitter consequences which Shylock of Venice
suffered, and then they may, perhaps, have understand-
ing to perceive, looming in a not very distant future,
still greater calamities in store for them, if they do
not, in time, renounce their claim to the pound of flesh.
The very Act under which they claim their 20 per
cent, will be, as with the Shylock of Venice, the perfect,
though, at the same time, the only justification of the
course by which the debtors will regain their freedom
if that Act is not quickly renounced.

Let the Shylocks of London remember that Parlia-
ment closed the mint against silver to satisfy what was
said to be their convenience, and not for the purpose'
of giving them 20 per cent, more of the property of
their debtors.

To attempt to justify the appropriation of this 20
per cent, by that Act of Parliament makes that Act as
great a breach of faith as that by which Shylock
obtained his legal right to the pound of flesh. " Lex
dederunt sed non lex dixerunt," must now be recorded

L

146 THE STANDARD OF VALUE.

against that Act ; and, as it now gives to the money-
lenders an advantage which it was expressly urged
that it was not intended to give, it ought, therefore, to
be at once frankly renounced, thus leaving the mint
open for the coining of silver as freely as for the coin-
ing of gold. In presence of a consideration of this
character, to argue about the comparative convenience
of a gold or a silver circulation, is childish prattle ;
it is worse than Nero's fiddling whilst Rome was
burning.

Whilst, under existing conditions, the English mint
remains closed against silver, it is manifestly disad-
vantageous for the Argentine Republic, or for any
nation with a large debt contracted in London, to
endeavour to maintain a gold circulation ; for every
ounce of gold they absorb in their own circulation
enhances the value of the gold debt due in London.

It is rather for the interest of such nations to
encourage the circulation of silver only ; so as to
restore the former par value of the two metals and
thus prevent the gold debt in London from becoming
permanently enhanced in value above the double
standard value under which the money was borrowed.
It should be kept in view that, as the silver standard
cannot be abolished in the manner advocated by the
Paris Conference of 1867, the double standard must,
therefore, of necessity, sooner or later restore itself;
and that the lower the relative value of silver may be
in the restoration of that standard, the greater will be

FOREIGN DEBTS IN LONDON 147

the permanent loss to the Argentine Republic on its
foreign loans. It is easy to see in what respects the
attempt to establish a gold circulation in this country-
must be pernicious under existing circumstances ;
whilst those same circumstances beset the idea of
establishing a silver standard with practical difficulties
which do not enter into the problem involved in the
establishment of a gold circulation. These are not
however, insurmountable, and the interests of the
country require that they should be fairly faced.

LONDON: PRINTED BY WILLIAM CLOWES AND SONS, LIMITED,
STAMFORD STREET AND CHARING CROSS.

Just Published) Demy %vo, with Thirteen Plates, Price 21s.

THE NEW PRINCIPLES

OF

NATURAL PHILOSOPHY.

BY

WILLIAM LEIGHTON JORDAN, F.R.G.S.,

Late President of the English Literary Society of Buenos Ayres.

TABLE OF CONTENTS.

CHAPTER.

I. Preliminary Remarks on How Little we Know and How
we Know It.

II. Remarks on the Recent Oceanic Explorations and the
. Current-Creating Action of Vis-Inertiae in the Ocean.

III. The Winds and the Earth's Rotation.

IV. The Winds and the Earth's Onward Motion.

V. Replies to Critics of " The Ocean."

VI. The Winds, Ocean Currents and Tides, and what they
tell of the System of the World.

A Lecture delivered at Willis's Rooms, King Street,
St. James's, November 3, 1877, as a Public Chal-
lenge to the Council of the Royal Society
and the Scientific Staff of the " Challenger "
Expedition.

VII. Second Challenge Lecture.

VIII. The Gyroscope.

IX. Huxley on the Laws of Motion — Present Position of the
Question.

X. Oceanic Circulation — Present Position of the Question.

XI. Copernicus versus the Royal Astronomical Society — the
Theory of the Moon's Motion.

XII. The Elements of Astronomy.

THE NEW PRINCIPLES OF NATURAL PHILOSOPHY.

CHAPTER.

XIII. The Secular Acceleration of the Moon's Motion.

Dedicated to William Spottiswoode, Esq., President
of the Royal Society, as a Challenge on Behalf
of the New Elements of Natural Philosophy.

XIV. The Theory of the Tides.

XV. The Circulating Action of Gravitation in the Ocean and
the Atmosphere.

XVI. Defence of Vis-Inertiae.

XVII. Dr. Siemens on Solar Heat — Present Position of the
Question.

XVIII. Scientific Honour.

XIX. Is Force Inherent in Matter?

XX. The Nebular Hypothesis, Modified by the Discoveries
of the Action of Astral Gravitation, and the Revolving
Force of Gravitation.

XXI. Amenities of Science —

i. The Tone of Science.

2. The Board of Trade on Oceanic Circulation.

3. The Earth as the Cause of the Moon's Motion.

4. Vis-Inertiae and Geology.

5. The Gravitation Theory of Heat.

6. Replies to the ' Popular Science Review ' on Vis-

Inertiae.

7. Replies to an Anonymous Critic on the Old and

the New Theories of Vis-Inertiae.

XXII. Further Astronomical Indications of the Action of the
New Theory —

1. Comets.

2. " The Sun's Long Streamers."

3. Stellar Movements.

4. The Circulation of the Surface of Jupiter.

5. The New Planet.

6. The Zodiacal Light.

7. Letter to the President of the Royal Society.

XXIII. Remarks on the Admiralty Current Charts.

XXIV. Dr. Carpenter on Oceanic Circulation.
XXV. Former Theories of the Winds.

LONDON : DAVID BOGtfE, 3, 8T. MABTDPS PLAOE,

TRAFALGAR SQUARE, W.C.

AN ANSWER TO 'KNOWLEDGE/

S*Soc-

Knowledge^ whilst criticising the * New Principles of Natural Philosophy*
in its issue of yesterday, says that I am "all hopelessly wrong;" but
the only definite point which it holds up to its readers as a specimen of
my errors is what it calls a " fancy that Vis-Inertiae can undergo diminu-
tion through the action of forces which in no way affect it — as, for
instance, that the horizontal velocity of moving matter is diminished,
by the vertical action of gravity."

The above contains two misrepresentations of my views ; for (i) I
have said on page 348 : " the force of inertia is truly inherent in matter ;
its quantity is always exactly in proportion to the quantity of matter,
and is neither more nor less exhaustible than the matter itself of which
it is an inherent property." And (2) I do not say that the horizontal
velocity of moving matter is diminished by the vertical action of
gravity; but on the contrary, I have said on page 178: "astral
gravitation, endeavouring at each moment to hold each particle in the
position which it last occupied, acts as a retarding force," and that
retarding force of gravitation obviously acts, as I have repeatedly
stated, in exactly the opposite direction to that of the motion of the
moving body.

For instance, the earth's gravitation is vertical to the moon's motion,
but the retarding force of gravitation is that which resists the action of
the earth's gravitation. Of course the vertical action of the earth's
gravitation keeps the wheels of a cart pressed against the ground, and
so may be considered to diminish horizontal velocity ; but Knowledge
did not, I presume, intend to question that. And the "vertical action
of gravity " may cause a body to fall to the earth, and so put an end to
its "horizontal" motion, but then it becomes rather an accelerating
than a retarding force whilst the motion lasts.

I have certainly argued against Professor Huxley that the upward
momentum of a body projected in a horizontal line will just as certainly

AN ANSWER TO 'KNOWLEDGE.'

be gradually spent by the resistance of the earth's gravitation, as if the
body had been projected in a vertical line;' but, as above shown, I
repudiate what Knowledge has laid before its readers as a specimen of
my opinions. Not only does Knowledge misrepresent my opinion, but
also, instead of fairly facing my arguments, it affects to despise my
personal abilities, in a manner which ill disguises the sense of its own
inability to refute those arguments ; and its disinclination to acknowledge
that after seventeen years of probation my views are found to be
unassailable by any fair argument

Although the above is the only point on which Knowledge has made
even the semblance of any attempt to controvert my views, I wish to
make some further statements, for the purpose of refuting strictures of
another character.

I. Some years ago the late Professor Adams announced that the
velocity of the earth's axial rotation is subject to a gradual retardation.

II. More recently Professors Newcomb and Neison announced that
the moon's orbital motion appeared to be subject to a gradual accelera-
tion, which kept it constantly, though very slightly, in advance of its
position as calculated by theory.

III. Immediately on receiving the latter announcement, I published
in Buenos Ayres a pamphlet, in which I pointed out that, according to
the theory I had previously published, a gradual acceleration of the
moon's orbital motion would be a natural and necessary effect of a
gradual retardation of the earth's axial rotation.

IV. The above mentioned pamphlet I dedicated to the President of
the Royal Society, Mr. William Spottiswoode,

I wish, in the first place, to repudiate the idea of the above-mentioned
dedication being construed as a supposition on my part that Mr.
Spottiswoode was either an opponent of my views or that he was
adopting them without acknowledgment. Knowledge has no justification
for saying that I have made any such accusations against Mr.
Spottiswoode, for the obvious object of the dedication was to endeavour
to draw Mr. Spottiswoode's attention to the subject

And, secondly ; it is the combined action of the revolving force of
the earth's gravitation and the retarding action of astral gravitation
that causes an acceleration of the moon's orbital motion to result from
any retardation of the earth's axial rotation; and, in answer to the
assertion that my book " reveals no new principles of philosophy," I
say: —

I. The revolving action of gravitation above alluded to was never

AN ANSWER TO 'KNOWLEDGE.'

imagined or announced by any one before it was pointed out by me. It
was then a " newly-revealed principle."

II. The retarding action of astral gravitation also was never imagined
or announced by any one before it was pointed out by me. It was also
then a " newly-revealed principle."

III. The demonstration of the manner in which the moon's orbital
motion is affected by the earth's axial rotation is a perfectly new
demonstration. I am not responsible for the assertion that the earth's
axial rotation is subject to a gradual retardation ; but, granting that
retardation, then I have demonstrated that an acceleration of the moon's
motion is a necessary consequence.

Instead of recklessly asserting that my book "reveals no new
principles of philosophy," let Knowledge state where and by whom
the two principles above mentioned had been previously announced.
And instead of writing contemptuously of my personal abilities, let it
refute the application I have made of those principles. If, without
personal abilities, I have baffled all the arguments of those who have
them, it is simply because I have had the advantage of a strong case to
support.

London, 26/A May % 1883.

M